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EQUITY INCENTIVE PLAN
 3 Months Ended
Jan. 31, 2012
EQUITY INCENTIVE PLAN
3. EQUITY INCENTIVE PLAN

 

In March 2008, we adopted the Hurco Companies, Inc. 2008 Equity Incentive Plan (the “2008 Plan”), which allows us to grant awards of stock options, Stock Appreciation Rights settled in stock (SARs), restricted shares, performance shares and performance units. The 2008 Plan replaced the 1997 Stock Option and Incentive Plan (the “1997 Plan”) which expired in March 2007. The Compensation Committee of the Board of Directors has authority to determine the officers, directors and key employees who will be granted awards; designate the number of shares subject to each award; determine the terms and conditions upon which awards will be granted; and prescribe the form and terms of award agreements. We have granted stock options under both plans which are currently outstanding and restricted shares under the 2008 Plan. No stock option may be exercised more than ten years after the date of grant or such shorter period as the Compensation Committee may determine at the date of grant. The total number of shares of our common stock that may be issued as awards under the 2008 Plan is 750,000. The market value of a share of our common stock, for purposes of the 2008 Plan, is the closing sale price as reported by the Nasdaq Global Select Market on the date in question or, if not a trading day, on the last preceding trading date.

 

A summary of stock option activity for the three-month period ended January 31, 2012, is as follows:

 

    Stock
Options		     Weighted
Average
Exercise
Price		  
             
Outstanding at October 31, 2011     115,369     $ 20.66  
                 
Options granted     45,236       21.45  
Options exercised     (500 )     2.15  
Options cancelled     —       —  
                 
Outstanding at January 31, 2012     160,105     $ 20.94  

 

 

Summarized information about outstanding stock options as of January 31, 2012, that have already vested and those that are expected to vest, as well as stock options that are currently exercisable, are as follows:

 

    Options already
vested and expected
to vest		     Options currently
exercisable		  
             
Number of outstanding options     160,105       77,356  
                 
Weighted average remaining contractual life (years)     7.66       4.72  
Weighted average exercise price per share   $ 20.94     $ 23.00  
                 
Intrinsic value of outstanding options   $ 650,000     $ 272,000  

 

The intrinsic value of an outstanding stock option is calculated as the difference between the stock price as of January 31, 2012 and the exercise price of the option.

 

On December 14, 2011, the Compensation Committee granted a total of 45,236 stock options under the 2008 Plan to our executive officers. The fair value of the options was estimated on the date of grant using a Black-Scholes valuation model with assumptions for expected volatility based on the historical volatility of our common stock of 64%, expected term of the options of five years, dividend yield rate of 0% and a risk-free interest rate of .86% based upon the five-year U.S. Treasury yield as of the date of grant. The options vest over a three-year period beginning one year from the date of grant. Based upon the foregoing factors, the grant date fair value of the stock options was determined to be $11.50 per share.

 

On December 14, 2011, the Compensation Committee granted a total of 24,243 shares of restricted stock to our executive officers. The restricted stock vests in full three years from the date of grant provided the recipient remains employed by us through that date. The grant date fair value of the restricted stock is based on the closing sales price of our common stock on the grant date which was $21.45 per share.

 

A reconciliation of the Company’s restricted stock activity and related information is as follows:

 

    Number of
Shares		     Weighted Average
Grant  Date
Fair Value		  
Unvested at October 31, 2011     30,859     $ 24.38  
Shares granted     24,243       21.45  
Shares vested     —       —  
Shares cancelled     —       —  
                 
Unvested at January 31, 2012     55,102     $ 23.09  

 

During the first three months of fiscal 2012 and 2011, we recorded $197,000 and $71,000, respectively, of stock-based compensation expense related to grants of stock options and shares of restricted stock. As of January 31, 2012, there was $1.6 million of total unrecognized stock-based compensation cost that we expect to recognize by the end of the first quarter of fiscal 2015.