Stock-Based Compensation and Stockholders’ Rights

Stock Incentive Plans

The Company's two stock plans are the 2011 Employee Stock Incentive Plan (the “2011 Plan”) and the 2007 Employee Incentive Stock Plan (the “2007 Plan”). Under the 2011 Plan, the Company may grant an aggregate of 1,000,000 shares to its employees and non-employee directors in the form of stock options or awards. Restricted stock or stock units awarded under the 2011 Plan are expensed ratably over the vesting period of the awards. The Company determines the fair value of its restricted stock unit awards and related compensation expense as the difference between the market value of the awards on the date of grant less the exercise price of the awards granted. The Company granted 0 awards under the 2011 Plan during the quarter ended April 30, 2014. As of April 30, 2014, there were approximately 349,320 shares available for future issuance under the 2011 Plan.

Under the 2007 Plan, the Company may grant an aggregate of 1,000,000 shares to its employees and non-employee directors in the form of stock options or awards. Restricted stock or stock units awarded under the 2007 Plan are expensed ratably over the vesting period of the awards. The Company determines the fair value of its restricted stock unit awards and related compensation expense as the difference between the market value of the awards on the date of grant less the exercise price of the awards granted. The Company granted 0 awards under the 2007 Plan during 2013 and 0 award under the 2007 Plan during the quarter ended April 30, 2014. As of April 30, 2014, there were approximately 13,075 shares available for future issuance under the 2007 Plan.

The shares of common stock issued upon exercise of a previously granted stock option are considered new issuances from shares reserved for issuance upon adoption of the various plans. While the Company does not have a formal written policy detailing such issuance, it requires that the option holders provide a written notice of exercise to the stock plan administrator and payment for the shares prior to issuance of the shares.

Accounting for the Plans

Restricted Stock Unit Awards

The following table presents a summary of restricted stock and stock unit awards at April 30, 2014 and 2013:



			Expense for 3 months ended				Unrecognized Compensation Cost at
Date of Grants	Units Granted	Terms of Vesting	4/30/2014		4/30/2013		4/30/2014
2011 Stock Incentive Plan
12/3/2013	10,000	1 year	$	6,000	$	—	$	7,000
12/3/2013	18,000	5 year	3,000		—		33,000
6/25/2013	71,430	1 year	37,000		—		13,000
6/19/2012	31,250	1 year	—		13,000		—
6/19/2012	520,000	5 year	40,000		42,000		483,000
2007 Stock Incentive Plan
6/19/2012	78,125	1 year	—		30,000		—
6/16/2009	382,500	5 year	47,000		57,000		15,000
Totals for the period			$	133,000	$	142,000	$	551,000

Stockholders’ Rights

On October 15, 1996, the Board of Directors declared a dividend of one preferred stock purchase right (the “Rights”) for each outstanding share of the Company’s common stock. Each of the Rights entitles a stockholder to purchase for an exercise price of $50.00 ($20.70, as adjusted for stock splits and stock dividends), subject to adjustment, one one-hundredth of a share of Series A Junior Participating Cumulative Preferred Stock of the Company, or under certain circumstances, shares of common stock of the Company or a successor company with a market value equal to two times the exercise price. The Rights are not exercisable, and would only become exercisable for all other persons when any person has acquired or commences to acquire a beneficial interest of at least 20% of the Company’s outstanding common stock. The Rights have no voting privileges, and may be redeemed by the Board of Directors at a price of $.001 per Right at any time prior to the acquisition of a beneficial ownership of 20% of the outstanding common stock. There are 200,000 shares, (483,153 shares as adjusted by stock splits and stock dividends) of Series A Junior Participating Cumulative Preferred Stock reserved for issuance upon exercise of the Rights. On July 31, 2007, the Company and Mellon Investor Services LLC entered into an amendment to the Rights Agreement governing the Rights. The amendment, among other things, extended the term of the Rights issued under the Rights Agreement to October 25, 2016, removed the dead-hand provisions from the Rights Agreement, and formally replaced the former Rights Agent, The Chase Manhattan Bank, with its successor-in-interest, Mellon Investor Services LLC.

As part of the Board of Directors ongoing review of the Company’s corporate governance policies, the Board of Directors determined that the trend among companies is to terminate or not renew shareholders rights plan absent a specific risk to the stockholders interest. To that end, the Board of Directors has determined to terminate the Rights Agreement and the Rights following the 2014 Annual Meeting of the Company’s stockholders, subject to shareholders approval.