Annual report pursuant to Section 13 and 15(d)

6. Stock-based Compensation

v2.4.0.6
6. Stock-based Compensation
 12 Months Ended
Dec. 31, 2011
Notes To Financial Statements  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
6.  STOCK-BASED COMPENSATION

The 2002 Stock Option Plan (the “2002 Plan”) provided for the granting of incentive and nonqualified stock options to employees, officers of the Company, members of the Board of Directors, or consultants.  The terms of any particular grant were determined by the Board of Directors or a committee appointed by the Board of Directors.  Historically, the terms ranged from five to ten years.  Stock options granted to employees and officers of the Company generally vested over three years, and stock options granted to members of the Board of Directors generally vested immediately.

On August 18, 2006, the Compensation Committee of Company’s Board of Directors approved, subject to stockholder approval, the Natural Health Trends Corp. 2007 Equity Incentive Plan (the “2007 Plan”).  Under the 2007 Plan, the Company may grant (i) incentive stock options, (ii) nonqualified stock options, (iii) restricted stock, (iv) restricted stock units, (v) stock appreciation rights either in tandem with an option or alone and unrelated to an option, or SARs, (vi) performance shares, (vii) award shares, or (viii) stock awards.  The 2007 Plan replaces in its entirety the 2002 Plan which was deemed terminated on November 17, 2006, the date the Company’s stockholders approved the 2007 Plan.  Awards made under the 2002 Plan, however, shall continue to be subject to the terms of the 2002 Plan, except to the extent that either there is no conflict between the terms of the 2002 Plan and the terms of the 2007 Plan with respect to such awards or the recipient consents to the applicability of the terms of the 2007 Plan to such awards.

The purpose of the 2007 Plan is to enable the Company to attract and retain employees, officers, directors, consultants and advisors; to provide an incentive for them to assist in achieving long-range performance goals; and to enable them to participate in the long-term growth of the Company.  The terms of any particular grant are determined by the Board of Directors or a committee appointed by the Board of Directors.  Generally, the grants of restricted stock vest quarterly on a pro rata basis over a three-year period.  The maximum number of shares available for issuance under the 2007 Plan of 1,550,000 shares of common stock replaces those 1,550,000 shares available under the 2002 Plan.  At our Annual Meeting of Stockholders held on December 30, 2008, the Company’s stockholders approved an increase in the maximum number of shares available for issuance under the 2007 Plan by 500,000 shares.  As such, the maximum aggregate number of shares available for issuance under the 2007 Plan totals 2,050,000 shares.  As of December 31, 2011, 1,083 shares remain available to be granted under the 2007 Plan.
 
 
Valuation and Expense Information under FASB ASC Topic 718

Stock-based compensation expense totaled approximately $175,000 and $79,000 for 2010 and 2011, respectively.  No tax benefits were attributed to the stock-based compensation because a valuation allowance was maintained for substantially all net deferred tax assets.

The following table summarizes the Company’s stock option activity:

   
Shares
   
Wtd. Avg. Exercise Price
   
Wtd. Avg. Remaining Contractual Life
    Aggregate Intrinsic Value 1  
                         
Outstanding at December 31, 2009
    27,500     $ 1.80                  
Cancelled, forfeited or expired
    (5,000 )     1.80                  
Outstanding at December 31, 2010
    22,500       1.80                  
Cancelled, forfeited or expired
    (22,500 )     1.80                  
Outstanding at December 31, 2011
    –       –       –     $ –  
1 Aggregate intrinsic value is defined as the positive difference between the current market value and the exercise price and is estimated using the closing price of the Company’s common stock on the last trading day of the periods ended as of the dates indicated (in thousands).
 
 
No stock options vested during 2010 and 2011.  As of December 31, 2011, no unrecognized stock-based compensation expense related to stock options is remaining.

A following table summarizes the Company’s restricted stock activity:

   
Shares
   
Wtd. Avg. Price at Date of Issuance
 
       
Outstanding at December 31, 2009
    412,122     $ 0.71  
Granted
    –       –  
Vested
    (224,693 )     0.85  
Forfeited
    (72,816 )     0.69  
Outstanding at December 31, 2010
    114,613       0.45  
Granted
    620,000       0.37  
Vested
    (242,177 )     0.38  
Forfeited
    (18,748 )     0.69  
Outstanding at December 31, 2011
    473,688       0.37  

On May 12, 2011, the Company granted 600,000 shares of restricted stock under the 2007 Equity Incentive Plan to its executive officers, directors, and certain key employees.  An additional 20,000 shares were granted on October 19, 2011 to another key employee.  The restricted stock vests quarterly on a pro rata basis over a three-year period.

As of December 31, 2011, total unrecognized stock-based compensation expense related to non-vested restricted stock was approximately $187,000, which is expected to be recognized over a weighted-average period of 2.2 years.