Stock-Based Compensation

6 Months Ended

Jul. 31, 2011

Stock- Based Compensation [Abstract]

STOCK-BASED COMPENSATION

NOTE 9 — STOCK-BASED COMPENSATION

In June 2011, the stockholders approved the adoption of the 2011 Stock Plan (the “Stock Plan”) including 500,000 shares of the Company’s common stock reserved for issuance thereunder. The purpose of the Stock Plan is to aid in attracting and retaining individuals with outstanding ability, to provide incentives to employees, directors and consultants who are in a position to contribute materially to the Company’s long term success, and to increase their interests in the Company’s welfare. Awards may include incentive or nonqualified stock options, and restricted or unrestricted stock. The Stock Plan will expire in July 2021. The Stock Plan serves to replace the Argan, Inc. 2001 Stock Option Plan (the “Option Plan”) which expired in July 2011. Under the Option Plan, the Company’s Board of Directors granted incentive and nonqualified stock options to officers, directors and key employees. A summary of stock option activity under the Option and Stock Plans for the six months ended July 31, 2011 is presented below:

						Weighted
				Weighted		Average		Weighted
				Average		Remaining		Average
				Exercise		Contract		Fair
Options	Shares			Price		Term (Years)		Value
Outstanding, January 31, 2011		676,000		$	11.29		5.78	$	5.79
Granted		87,000		$	8.99
Forfeited		(8,000	)	$	10.29
Exercised		(5,000	)	$	5.90
Outstanding, July 31, 2011		750,000		$	11.07		5.35	$	5.60
Exercisable, January 31, 2011		439,000		$	10.12		5.90	$	5.51
Exercisable, July 31, 2011		608,000		$	11.58		5.14	$	5.93

A summary of the change in the number of non-vested options to purchase shares of common stock for the six months ended July 31, 2011 is presented below:

				Weighted
				Average
Options	Shares			Fair Value
Nonvested, January 31, 2011		237,000		$	6.31
Granted		87,000		$	3.99
Forfeited		(5,000	)	$	4.98
Vested		(177,000	)	$	6.92
Nonvested, July 31, 2011		142,000		$	4.16

Compensation expense amounts related to stock options were $138,000 and $388,000 for the three months ended July 31, 2011 and 2010, respectively, and were $349,000 and $708,000 for the six months ended July 31, 2011 and 2010, respectively. At July 31, 2011, there was $303,000 in unrecognized compensation cost related to stock options granted under the Stock and Option Plans. The Company expects to recognize the compensation expense for these awards within the next nine months. The total intrinsic value of the stock options exercised during the six months ended July 31, 2011 was approximately $18,000. At July 31, 2011, the aggregate exercise price of outstanding and exercisable stock options exceeded the aggregate market value of shares of common stock subject to such options by approximately $527,000 and $734,000, respectively.

The fair value of each stock option granted in the six-month period ended July 31, 2011 was estimated on the date of award using the Black-Scholes option-pricing model based on the following weighted average assumptions.

	Six Months Ended
	July 31, 2011
Dividend yield		—
Expected volatility		57.55	%
Risk-free interest rate		3.42	%
Expected life in years		3.57

During the current quarter, the Company awarded 5,000 shares of restricted stock to an employee. The aggregate market value of the shares is being amortized to compensation expense over the two-year vesting period.

The Company also has outstanding warrants to purchase 160,000 shares of the Company’s common stock, exercisable at a per share price of $7.75, that were issued in connection with the Company’s private placement in April 2003. The warrants were issued to three individuals who became the executive officers of the Company upon completion of the offering and to an investment advisory firm. A director of the Company is also the chief executive officer of the investment advisory firm. All warrants are currently exercisable and will expire in December 2012.

At July 31, 2011, there were 1,410,000 shares of the Company’s common stock available for issuance upon the exercise of outstanding warrants and stock options and the vesting of restricted stock, including 495,000 shares of the Company’s common stock available for option and stock awards under the Stock Plan.