Stock-Based Compensation

3 Months Ended

Oct. 31, 2013

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 5. Stock-Based Compensation

Stock Option Plans

The following table provides information about stock-based awards outstanding at October 31, 2013:

	Shares		Weighted Average Exercise Price		Weighted Average Fair Value
Options outstanding beginning of period		747,662	$	4.17	$	3.23
For the period August 1, 2013 through October 31, 2013
Granted		--		--		--
Forfeited		--		--		--
Exercised		--		--		--
Options outstanding, end of period		747,662	$	4.17	$	3.23
Options exercisable, end of period		545,883	$	3.79	$	2.95

There were no options granted in the first quarter of fiscal 2014.  Each independent director receives an option to purchase 10,000 shares of the Company’s Common Stock each year in which he or she is elected, appointed, or continues to serve as a director pursuant to the Amended and Restated 2005 Non-Employee Directors’ Stock Option Plan. These options vest pro-ratably on a quarterly basis over the next year of service on the Board.  During the second quarter of fiscal 2013, there were options to purchase 60,000 shares of Common Stock granted to the Company’s independent directors, which vest pro-ratably on a quarterly basis over the next year of service.  These options also vest upon a change of control event. The Company recorded $43,000 and $68,000 of compensation expense for the three months ended October 31, 2013 and 2012, respectively, with respect to the directors’ options.

During the second quarter of fiscal 2013, there were options to purchase 82,227 shares of Common Stock granted to the officers and employees of the Company.  These options were granted in conjunction with the Company’s annual review of compensation as of August 1, 2012 and vest on a quarterly basis over the next four years of service. The Company recorded $17,000 of compensation expense for the three months ended October 31, 2013, related to these options.  In addition, the Company recorded $48,000 and $48,000 of compensation expense for the three months ended October 31, 2013 and 2012, respectively, for previously granted options.

The Company expects to issue new shares as options are exercised. As of October 31, 2013, the future compensation cost expected to be recognized for currently outstanding stock options is approximately $225,000 for the remainder of fiscal 2014, $254,000 in fiscal 2015, $226,000 in fiscal 2016 and $88,000 in fiscal 2017.

The fair value of all options granted during the second quarter of fiscal 2013 was determined at the date of the grant using the Black-Scholes option-pricing model and the following assumptions:

Expected average risk-free interest rate	1.72%
Expected average life (in years)	10
Expected volatility	70.5%
Expected dividend yield	0.0%

The expected average risk-free rate is based on the 10-year U.S. treasury yield curve in December of 2012.  The expected average life represents the period of time that the options granted are expected to be outstanding giving consideration to the vesting schedules, historical exercises and forfeiture patterns.  Expected volatility is based on historical volatilities of the Company’s Common Stock.  The expected dividend yield is based on historical information and the Board of Directors' plan, to reinvest available resources in the growth of the Company for the foreseeable future.

The intrinsic value of the in-the-money stock options outstanding was $393,000 and $2.0 million at October 31, 2013 and 2012, respectively.  The intrinsic value of in-the-money exercisable stock options was $375,000 and $1.2 million at October 31, 2013 and 2012, respectively.

Restricted Stock Plans

Under the Amended and Restated Synergetics USA, Inc. Stock Plan (the "2001 Plan"), the Company’s common stock may be granted at no cost to certain employees and consultants of the Company.  Certain plan participants are entitled to cash dividends and voting rights for their respective shares.  Restrictions limit the sale or transfer of these shares during a vesting period whereby the restrictions lapse either pro-ratably over a three-year or five-year vesting period or at the end of the third or fifth year.  These shares also vest upon a change of control event.  Upon issuance of stock under the 2001 Plan, unearned compensation equivalent to the market value at the date of the grant is charged to stockholders’ equity and subsequently amortized to expense over the applicable restriction period.  As of October 31, 2013, there was approximately $928,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company’s 2001 Plan.  The cost is expected to be recognized over a weighted average period of four years which is generally the vesting period. The following table provides information about restricted stock grants during the three-month period ended October 31, 2013:

	Number of Shares			Weighted Average Grant Date Fair Value
Balance as of July 31, 2013		405,248		$	3.79
Granted		--			--
Forfeited		(2,001	)	$	3.47
Vested		(51,117	)	$	2.97
Balance as of October 31, 2013		352,130		$	3.91