13. STOCK-BASED COMPENSATION

Stock-based compensation expense associated with awards made by CTI and its subsidiaries is included in the Company's condensed consolidated statements of operations as follows:


	Three Months Ended April 30,
	2011		2010
	(In thousands)
Stock options:
Product costs	$	97	$	400
Service costs		166		1,179
Selling, general and administrative		1,390		7,222
Research and development		240		2,519

		1,893		11,320

Restricted/Deferred stock awards:
Product costs		172		239
Service costs		645		598
Selling, general and administrative		7,592		7,538
Research and development		775		1,062

		9,184		9,437

Total	$	11,077	$	20,757

CTI

CTI's Restricted Period

As a result of the delinquency in the filing of periodic reports under the Exchange Act since April 2006, CTI has been ineligible to use its registration statements on Form S-8 for the offer and sale of equity securities, including through the exercise of stock options by employees. Consequently, to ensure that it does not violate the federal securities laws, CTI prohibited the exercise of vested stock options from April 2006, until such time, as it is determined that CTI has filed all periodic reports required in a 12-month period and has an effective registration statement on Form S-8 on file with the SEC. This period is referred to as the "restricted period."

Restricted Awards and Stock Options

CTI granted restricted stock, deferred stock units ("DSU") awards (collectively "Restricted Awards") and stock options under its various stock incentive plans.

During the three months ended April 30, 2011, CTI granted DSU awards covering an aggregate of 984,719 shares of CTI's common stock to certain executive officers and key employees.

During the three months ended April 30, 2010, CTI granted DSU awards covering an aggregate of 1,013,000 shares of CTI's common stock to certain executive officers and key employees, including a DSU award covering 300,000 shares of CTI's common stock to CTI's then-President and Chief Executive Officer and a DSU award covering 150,000 shares of CTI's common stock to CTI's then-Executive Vice President and Chief Financial Officer.

As of April 30, 2011, stock options to purchase 11,050,468 shares of CTI's common stock and Restricted Awards with respect to 1,776,713 shares of CTI's common stock were outstanding and 3,631,649 shares of CTI's common stock were available for future grant under CTI's Stock Incentive Compensation Plans. In addition, as of April 30, 2011, CTI was committed to issue 1,074,866 shares of its common stock to holders of its vested Restricted Awards who had elected to defer delivery of such underlying shares.

The total fair value of Restricted Awards vested during the three months ended April 30, 2011 and 2010 was $8.3 million and $6.3 million, respectively. As of April 30, 2011, the unrecognized compensation expense related to unvested Restricted Awards was $12.0 million which is expected to be recognized over a weighted-average period of 2.4 years.

The outstanding stock options at April 30, 2011 include unvested options to purchase 352,268 shares of CTI's common stock with a weighted-average grant date fair value of $2.34, an expected term of 4.0 years and a total fair value of $0.8 million. The unrecognized compensation cost related to the remaining unvested options to purchase CTI's common stock was $0.5 million, which is expected to be recognized over a weighted-average period of 1.1 years.

The fair value of options to purchase CTI's common stock vested during the three months ended April 30, 2011 and 2010 was zero.

Verint

Stock Options

Verint has not granted stock options subsequent to January 31, 2006. However, in connection with Verint's acquisition of Witness on May 25, 2007, stock options to purchase Witness common stock were converted into stock options to purchase approximately 3.1 million shares of Verint Systems' common stock.

During the period of Verint Systems' delinquency in the filing of its periodic reports under the Exchange Act, stock option exercises were suspended. Following Verint Systems' filing of certain delayed periodic reports in June 2010, stock option holders were permitted to resume exercising vested stock options. During the three months ended April 30, 2011, approximately 258,000 shares of Verint Systems' common stock were issued pursuant to stock option exercises for total proceeds of $5.2 million. As of April 30, 2011, Verint Systems had approximately 1.5 million shares subject to outstanding stock options, all of which were exercisable as of such date.

Restricted Stock Awards and Restricted Stock Units

Verint Systems periodically awards shares of restricted stock, as well as restricted stock units, to its directors, officers and other employees. These awards contain various vesting conditions, and are subject to certain restrictions and forfeiture provisions prior to vesting.

During the three months ended April 30, 2011 and 2010, Verint Systems granted 0.9 million restricted stock units and 1.0 million combined restricted stock awards and restricted stock units, respectively. Forfeitures of restricted stock awards and restricted stock units were not significant during either period. As of April 30, 2011 and 2010, Verint Systems had 1.8 million and 4.1 million of combined restricted stock awards and stock units outstanding, respectively, with weighted-average grant date fair values of $29.17 and $25.30, respectively.

As of April 30, 2011, there was approximately $34.5 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested restricted stock awards and restricted stock units, which is expected to be recognized over weighted-average periods of 0.1 years for restricted stock awards and 1.7 years for restricted stock units.

Phantom Stock Units

Verint Systems liability-classified awards are primarily phantom stock units. Verint Systems has issued phantom stock units to certain non-officer employees that settle or are expected to settle with cash payments upon vesting. Like equity-settled awards, phantom stock units are awarded by Verint Systems with vesting conditions and are subject to certain forfeiture provisions prior to vesting.

Phantom stock units granted by Verint Systems during the three months ended April 30, 2011 were not significant. During the three months ended April 30, 2010, Verint Systems granted 0.2 million phantom stock units. Forfeitures of awards in each period were not significant. Total cash payments made by Verint Systems upon vesting of phantom stock units were $7.0 million and $10.6 million for the three months ended April 30, 2011 and 2010, respectively. The total accrued liabilities for phantom stock units were $4.5 million and $9.8 million as of April 30, 2011 and January 31, 2011, respectively.