(5) Share-Based Compensation

Astro-Med has one equity incentive plan (the "Plan") under which incentive stock options, non-qualified stock options, restricted stock and other equity based awards may be granted to officers and certain employees. To date, only options have been granted under the Plan. Options granted to employees vest over four years. An aggregate of 1,000,000 shares were authorized for awards under the Plan. The exercise price of each stock option will be established at the discretion of the Compensation Committee; however, any incentive stock options granted must be at an exercise price of not less than fair market value at the date of grant. The Plan provides for an automatic annual grant of ten-year options to purchase 5,000 shares of stock to each non-employee director upon the adjournment of each annual shareholders' meeting. Each such option is exercisable at the fair market value as of the grant date and vests immediately prior to the next succeeding annual shareholders' meeting. During the second quarter of fiscal 2012, 15,000 options were awarded to non-employee directors pursuant to the Plan. At July 30, 2011, 688,044 shares were available for grant under the Plan.

We have estimated the fair value of each option on the date of grant using the Black-Scholes option-pricing model. Our estimate of share-based compensation requires a number of complex and subjective assumptions including our stock price volatility, employee exercise patterns (expected life of the options), the risk-free interest rate and the Company's dividend yield. The stock price volatility assumption is based on the historical weekly price data of our common stock over a period equivalent to the weighted average expected life of our options. Management evaluated whether there were factors during that period which were unusual and would distort the volatility figure if used to estimate future volatility and concluded that there were no such factors. In determining the expected life of the option grants, the Company has observed the actual terms of prior grants with similar characteristics and the actual vesting schedule of the grant and has assessed the expected risk tolerance of different option groups. The risk-free interest rate is based on the actual U.S. Treasury zero coupon rates for bonds matching the expected term of the option as of the option grant date.

The fair value of stock options granted during the six months ended July 30, 2011 and July 31, 2010 was estimated using the following assumptions:


	Six Months Ended
	July 30, 2011			July 31, 2010
Risk Free Interest Rate		1.8% - 2.0	%		2.11% - 2.42	%
Expected Volatility		39.1% - 39.4	%		41.3	%
Expected Life (in years)		5.0			5.0
Dividend Yield		3.6% - 3.9	%		3.4	%

The weighted average fair value per share for options granted was $2.03 during the first quarter of fiscal 2012 and $2.05 during the second quarter of fiscal 2012 compared to $2.12 and $2.06 during the first and second quarters of fiscal 2011.

Aggregated information regarding stock options granted under the Plan for the six months ended July 30, 2011 is summarized below:


	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Outstanding at January 31, 2011		1,219,183		$	7.03		4.2	$	1,946,412
Granted		50,000			7.96
Exercised		(102,322	)		3.13
Expired or canceled		(19,769	)		7.25

Outstanding at July 30, 2011		1,147,092		$	7.42		4.0	$	1,459,139

Exercisable at July 30, 2011		1,000,684		$	7.41		3.4	$	1,377,293

Share-based compensation expense was recognized as follows:


	Three Months Ended				Six Months Ended
	July 30, 2011		July 31, 2010		July 30, 2011		July 31, 2010
Cost of Sales	$	7,119	$	13,996	$	21,276	$	32,158
Operating Expenses		33,489		64,260		96,970		142,347

Total	$	40,608	$	78,256	$	118,246	$	174,505

As of July 30, 2011 there was $260,961 of unrecognized compensation expense related to unvested options.

Astro-Med has an Employee Stock Purchase Plan allowing eligible employees to purchase shares of common stock at a 15% discount from fair value on the date of purchase. A total of 247,500 shares were reserved for issuance under this plan. During the quarters ended July 30, 2011 and July 31, 2010, 1,559 and 1,939 shares respectively, were purchased under this plan. During the six months ended July 30, 2011 and July 31, 2010, 3,277 and 3,667 shares respectively, were purchased under this plan. As of July 30, 2011, 73,731 shares remain available.