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Stock-based compensation
 3 Months Ended
Mar. 31, 2012
Stock-based compensation

4. Stock-based compensation

 

The Company issues stock under incentive plans that form part of employees’ and non-executive directors’ remuneration. The Company also grants options to purchase common stock as part of remuneration for certain long-serving employees.

 

Stock-based compensation totaled $112,609 and $76,876 for the three months ended March 31, 2012 and 2011, respectively, and is included in general and administrative expenses in the condensed consolidated statements of income.

 

The Company estimates the fair value of the stock options granted and rights to acquire stock using the Black-Scholes option pricing model which requires the Company to make a number of estimates and assumptions including forfeiture rate, volatility and expected life. The Company does not expect any forfeitures and therefore expects to recognize the full compensation costs for these equity awards. The Company calculated expected volatility based primarily upon the historical volatility of the Company’s common stock.

 

The expected life of options granted represents the period of time that options granted are expected to be outstanding, which incorporates the contractual terms, grant vesting schedules and terms and expected employee behaviors. As the Company has so far only awarded what the SEC has defined as “plain vanilla options”, the Company uses the “simplified method” allowed by the SEC for determining the expected life of the options granted.

 

A summary of stock option activity under the Company’s share-based compensation plans for the three months ended March 31, 2012 is presented in the following table:

 

    Options     Weighted
Average
Exercise Price		     Weighted
Average
Remaining
Contractual Life
(Years)		     Aggregate
Intrinsic
Value (1)		  
Outstanding at beginning of period     378,394     $ 14.91                  
Granted     -       -                  
Exercised     -       -                  
Forfeited     (33,885 )     29.27                  
Outstanding as of March 31, 2012     344,509     $ 13.49       2.77     $ 35,212  
Exercisable as of March 31, 2012     217,338     $ 15.18       1.96     $ 35,212  

 

 

 

(1) The intrinsic value of a stock option represents the amount by which the fair value of the underlying stock, measured by reference to the closing price of the common stock of $7.91 in the NASDAQ Global Select Market on March 31, 2012, exceeds the exercise price of the option.

 

As of March 31, 2012, 127,171 non-vested options and 217,338 vested options were outstanding, with weighted average exercise prices of $10.62 and $15.18, respectively, and average remaining contractual lives of 4.16 years and 1.96 years, respectively. The total remaining unrecognized compensation costs related to unvested stock-based arrangements were $321,389 as of March 31, 2012 and are expected to be recognized over a weighted average period of 4.16 years.

 

As of March 31, 2012, unrecognized compensation costs relating to redeemable preferred stock outstanding were $88,488, and are expected to be recognized over a weighted average period of 1.05 years.