Note 4 - Stock Compensation

9 Months Ended

Oct. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

4. Stock-Based Compensation

We grant stock awards for a fixed number of shares to employees, consultants, and directors pursuant to the Company’s shareholder-approved equity incentive plans.

We account for stock-based compensation using the modified prospective method, which requires measurement of compensation cost for all stock awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using a Lattice Binomial model for options with performance-based vesting tied to the Company’s stock price and the Black-Scholes valuation model for options with ratable term vesting. Both the Lattice Binomial and Black-Scholes valuation models require the input of subjective assumptions. These assumptions include estimating the length of time optionees will retain their vested stock options before exercising them (the “expected term”), the estimated volatility of our common stock price over the expected term, and the number of awards that will ultimately not complete their vesting requirements (“forfeitures”). Changes in these subjective assumptions can materially affect the estimate of fair value of stock-based compensation and, consequently, the related amount recognized as an expense on the consolidated statements of operations. As required under applicable accounting rules, we review our valuation assumptions at each grant date and, as a result, we are likely to change our valuation assumptions used to value stock-based awards granted in future periods. The values derived from using either the Lattice Binomial or the Black-Scholes model are recognized as an expense over the vesting period, net of estimated forfeitures. The estimation of stock awards that will ultimately vest requires significant judgment. Actual results, and future changes in estimates, may differ from our current estimates.

The compensation expense recognized is summarized in the table below (in thousands except per share amounts):

	Three Months Ended October 31,				Nine Months Ended October 31,
	2013		2012		2013		2012
Total stock-based compensation expense	$	18	$	39	$	71	$	115

Impact on basic and diluted earnings per share	$	0.00	$	0.00	$	0.00	$	0.01

The total compensation cost related to nonvested awards not yet recognized is approximately $76,000, which will be expensed over a weighted average remaining life of 17.8 months.

During the three and nine months ended October 31, 2013, no stock options were granted and 420,000 shares of restricted stock were granted. During the three months ended October 31, 2012, 465,000 stock options were granted and no restricted stock was granted. During the nine months ended October 31, 2012, 300,000 restricted stock units were granted and 465,000 stock options were granted. The fair value of the restricted stock granted during the nine months ended October 31, 2013 was estimated using the stock price on the date of the grant of $0.18 and a forfeiture rate of 8.2 percent. The fair value of the restricted stock units granted during the nine months ended October 31, 2012 was estimated using the stock price on the date of the grant of $0.16 and a forfeiture rate of 10.6 percent.

The fair value of the 465,000 options granted under our stock option plans during the first three quarters of fiscal 2013 was estimated on the date of grant using the following weighted average assumptions:

	Year-to-date October 31, 2012
Weighted average risk-free interest rate		0.7	%
Expected life (in years)		5.5
Expected stock volatility		121	%
Dividend yield	None
Expected forfeitures		8.2	%

The Company’s former employee stock option plan (the “Employee Plan”) expired during May 2005. As a result, no new options could be granted under the plan thereafter. This plan provided for the issuance of up to 825,000 shares of common stock. During December 2005, the Board of Directors approved and adopted the Company’s 2005 Equity Incentive Plan (the “2005 Plan”) covering 450,000 shares of common stock. The 2005 Plan was approved by the Company’s shareholders at its annual shareholders’ meeting in June 2006, and subsequently amended at its annual shareholders’ meeting in June 2008 to increase the number of shares issuable under the plan from 450,000 to 1,100,000 shares. In July 2011, the Company’s shareholders approved the 2011 Equity Incentive Plan (the “2011” Plan) covering 750,000 shares of common stock.

Under both the 2011 and 2005 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and performance based awards to employees, consultants and directors. Under all plans, awards vest or become exercisable in installments determined by the compensation committee of the Company’s Board of Directors; however, under the 2005 Plan no option may be exercised prior to one year following the grant of the option. The options granted under the Employee Plan expire as determined by the committee, but no later than ten years and one week after the date of grant (five years for 10 percent shareholders). The options granted under the 2011 and 2005 Plan expire as determined by the committee, but no later than ten years after the date of grant (five years for 10 percent shareholders).

In the aggregate, Comarco has stock-based compensation plans under which outside directors, consultants, and employees are eligible to receive stock options and other equity-based awards. The stock option plans provide that officers, key employees, directors and consultants may be granted options to purchase up to 2,675,000 shares of common stock of the Company at not less than 100 percent of the fair market value at the date of grant, unless the grantee is a 10 percent shareholder of the Company, in which case the price must not be less than 110 percent of the fair market value.

Transactions and other information related to stock options granted under these plans for the nine months ended October 31, 2013 are summarized below:

	Outstanding Options
	Number of Shares			Weighted-Average Exercise Price
Balance, January 31, 2013		764,500		$	1.48
Options granted		—			—
Options canceled or expired		(5,000	)		8.08
Options exercised		—			—
Balance, October 31, 2013		759,500		$	1.44
Stock Options Exercisable at October 31, 2013		672,100		$	1.48

Transactions and other information related to restricted stock units (“RSU’s”) granted under these plans for the nine months ended October 31, 2013 are summarized below:

	Outstanding Restricted Stock Units
	Number of Shares			Weighted-Average Stock Price On Grant Date
Balance, January 31, 2013		304,326		$	0.20
RSU’s granted		—			—
RSU’s canceled or expired		(112,700	)		0.16
Common stock issued		(191,626	)		0.20
Balance, October 31, 2013		—		$	—

The RSU’s canceled or expired in the table above represent the difference between the number of shares awarded and the number issued because the recipient elected a net award to cover personal income taxes.

Transactions and other information related to restricted stock granted under these plans for the nine months ended October 31, 2013 are summarized below:

	Outstanding Restricted Stock
	Number of Shares		Weighted-Average Stock Price On Grant Date
Balance, January 31, 2013		—	$	—
Restricted stock granted		420,000		0.18
Restricted stock forfeited		—		—
Balance, October 31, 2013		420,000	$	0.18

As of October 31, 2013, the stock awards outstanding have no aggregate intrinsic value, based on a closing market price of $0.17 per share on October 31, 2013. The following table summarizes information about the Company’s stock awards outstanding at October 31, 2013:

				Awards Outstanding						Awards Exercisable
Range of Exercise/Grant Prices				Number Outstanding		Weighted-Avg. Remaining Contractual Life (Years)		Weighted-Avg. Exercise/Grant Price		Number Exercisable		Weighted-Avg. Exercise/Grant Price
$	0.18	to	1.20		1,103,500		4.73	$	0.45		596,100	$	0.55
		4.90			15,000		4.33		4.90		15,000		4.90
	8.38	to	10.43		61,000		1.93		9.68		61,000		9.68
					1,179,500		4.58		0.99		672,100		1.48

At October 31, 2013, shares available for future grants under the 2011 Plan totaled 35,224.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References+ Details