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Stock-based compensation
 9 Months Ended
Sep. 30, 2012
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

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 $100,891 and $138,206 for the three months ended September 30, 2012 and 2011, respectively, and $296,674 and $339,973 for the nine months ended September 30, 2012 and 2011, respectively, and is included in general and administrative expenses in the condensed consolidated statements of income.

 

In June 2012, the Company granted 10,033 preferred stock options to certain employees under its Employee Share Incentive Plan. The significant weighted average assumptions for these preferred stock options were as follows: risk free interest rate of 0.08%; expected option life of 0.08 years; expected volatility of 30.84%; expected dividend yield of 3.87%.  These preferred stock options began vesting on June 13, 2012 and expired thirty days from the vesting date.

 

In July 2012, the Company issued 5,780 common stock options to certain employees under its 2001 Employee Share Option Plan. The significant weighted average assumptions for these common stock options were as follows: risk free interest rate of 0.57%; expected option life of 4.08 years; expected volatility of 65.29%; expected dividend yield of 3.62%. The common stock options vest on July 1, 2016 and expire thirty days from the vesting date.

 

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 assume any forfeitures in calculating the fair value of its stock options. The Company estimates 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 nine months ended September 30, 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     15,813       7.13                  
Exercised     (1,384 )     6.46                  
Forfeited / expired     (77,169 )     18.99                  
Outstanding as of September 30, 2012     315,654     $ 13.56       2.32     $ 32,701  
Exercisable as of September 30, 2012     199,300     $ 15.34       1.49     $ 32,701  

 

 

(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 $8.27 in the NASDAQ Global Select Market on September 30, 2012, exceeds the exercise price of the option.

 

As of September 30, 2012, 116,354 non-vested options and 199,300 vested options were outstanding, with weighted average exercise prices of $10.51 and $15.34, respectively, and average remaining contractual lives of 3.73 years and 1.49 years, respectively.  The total remaining unrecognized compensation costs related to unvested stock-based arrangements were $189,475 as of September 30, 2012 and are expected to be recognized over a weighted average period of 3.73 years.

 

As of September 30, 2012, unrecognized compensation costs relating to redeemable preferred stock outstanding were $129,385, and are expected to be recognized over a weighted average period of 1.23 years.