Stock-Based Compensation

3 Months Ended

Apr. 30, 2013

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 Stock Plan, which will expire in July 2021, served to replace the Argan, Inc. 2001 Stock Option Plan (the “Option Plan”) which expired in July 2011. As was the case under the Option Plan, the Company’s Board of Directors may make awards under the Stock Plan to officers, directors and key employees. Awards may include incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”), and restricted or unrestricted stock. ISOs granted under the Stock Plan shall have an exercise price per share at least equal to the common stock’s market value per share at the date of grant, a seven or ten-year term, and typically shall become fully exercisable one year from the date of grant. NSOs may be granted at an exercise price per share that differs from the common stock’s market value per share at the date of grant, may have up to a ten-year term, and become exercisable as determined by the Company’s board of directors, typically one year from the date of award. At April 30, 2013, there were 495,000 shares of the Company’s common stock reserved for issuance under the two plans, including approximately 10,500 shares of the Company’s common stock available for awards under the Stock Plan.

A summary of activity under the Option and Stock Plans for the three months ended April 30, 2013 is presented below:

Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contract Term (Years)		Weighted Average Fair Value
Outstanding, January 31, 2013		926,224	$	14.34		5.39	$	5.93
Granted		71,000	$	16.11
Forfeited		—	$	—
Exercised		—	$	—
Outstanding, April 30, 2013		997,224	$	14.47		5.63	$	5.74
Exercisable, April 30, 2013		700,724	$	13.17		4.78	$	5.94
Exercisable, January 31, 2013		537,724	$	12.16		4.46	$	6.12

A summary of the change in the number of non-vested options to purchase shares of common stock for the three months ended April 30, 2013 is presented below:

	Shares			Weighted Average Fair Value
Nonvested, January 31, 2013		388,500		$	5.67
Granted		71,000		$	3.27
Forfeited		—		$	—
Vested		(163,000	)	$	5.35
Nonvested, April 30, 2013		296,500		$	5.27

Compensation expense amounts related to stock options were $436,000 and $236,000 for the three months ended April 30, 2013 and 2012, respectively. At April 30, 2013, there was $844,000 in unrecognized compensation cost related to outstanding stock options. The Company expects to recognize the compensation expense for these awards within the next twelve months. There were no stock options exercised during the three months ended April 30, 2013. At April 30, 2013, the aggregate market value of the shares of common stock subject to outstanding and exercisable stock options exceeded the aggregate exercise price of such options by approximately $3,224,000 and $3,178,000, respectively.

The fair value of each stock option granted in the three-month period ended April 30, 2013 was estimated on the date of award using the Black-Scholes option-pricing model based on the following weighted average assumptions.

	Three Months Ended April 30, 2013
Dividend yield		3.73	%
Expected volatility		33.44	%
Risk-free interest rate		0.81	%
Expected life in years		5.5

In June 2011, the Company awarded 5,000 shares of restricted stock to an employee. The aggregate market value of the shares is being amortized over the two-year vesting period to compensation expense, which was approximately $6,000 for each of the three month periods ended April 30, 2013 and 2012.

The Company also had outstanding warrants to purchase 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. Warrants covering 160,000 shares of the Company’s common stock were converted in the year ended January 31, 2013, including warrants converted to 4,000 shares in the three months ended April 30, 2012. There were no remaining warrants outstanding as of January 31, 2013.