Stock-Based Compensation

12 Months Ended

Dec. 31, 2012

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

Stock-Based Compensation

NOTE 11 — STOCK-BASED COMPENSATION

At December 31, 2012, a variety of the Company’s stock-based compensation grants or awards were outstanding for employees (including executive officers) and members of the Board. All stock-based compensation plans were approved by the Company’s Board.

Description of Stock Option Plans

The Company has five stock option plans, the following two of which continue to be available for issuance:

● The 2000 Stock Option Plan was adopted by the Board in November 2000 and approved by the stockholders on January 16, 2001. The Board adopted the Amended and Restated 2000 Stock Option Plan (the “2000 Plan”) effective as of August 3, 2001. Under the 2000 Plan, options granted may be either incentive or nonqualified options. Incentive options must have an exercise price of not less than the fair market value of a share of common stock on the date of grant. Nonqualified options must have an exercise price of not less than 85% of the fair market value of a share of common stock on the date of grant. Up to 2,000,000 options may be granted under the 2000 Plan. No option may be exercised more than ten years after the date of grant.  The Board does not intend to issue any additional options under this plan.

● The 2007 Stock Incentive Plan (the “2007 Plan”) was adopted by the Board in November 2007 and approved by the stockholders on December 12, 2007. Under the 2007 Plan, the administrator may grant or issue stock options (incentive or nonqualified), stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance awards and stock payments, or any combination thereof.  Up to 5,000,000 shares of common stock may be granted pursuant to awards under the 2007 Plan.  Incentive and nonqualified options must have an exercise price of not less than the fair market value of a share of common stock on the date of grant and may not be exercised more than ten years after the date of grant.  However, incentive options granted to an individual who owns (or is deemed to own) more than 10% of the total combined voting power of all class of EMRISE stock must have an exercise price of not less than 110% of the fair market value of a share of common stock on the date of grant and may not be exercised more than five years after the date of grant.  The base price of any SAR granted under the 2007 Plan must be at least 100% of the fair market value of a share of common stock on the date of grant.  SARs will be settled in shares of common stock.  Restricted stock may have a price as determined by the administrator.  Restricted stock units entitle the holder to receive vested shares of common stock.  Neither restricted stock or restricted stock units may be sold or otherwise hypothecated or transferred.  Performance awards will be paid in shares of common stock and may be granted to employees, consultants or independent directors based on specific performance criteria.  Stock payments may be issued to employees, independent directors or consultants in the form of common stock or an option or other right to purchase common stock and may be issued as part of a deferred compensation arrangement that would otherwise be paid in cash.

Stock option activity for the years ended December 31, 2012 and 2011 was as follows:

	2012					2011
	Shares (in 000’s)			Weighted Average Exercise Price		Shares (in 000’s)			Weighted Average Exercise Price
Outstanding, beginning of year		513		$	3.61		613		$	3.41
Granted		-		$	-		-		$	-
Exercised		-		$	-		-		$	-
Forfeited (including expirations)		(64	)	$	4.00		(100	)	$	2.36
Outstanding, end of year		449		$	3.56		513		$	3.61
Exercisable, end of year		449		$	3.56		507		$	3.64

As of December 31, 2012, the Company had 449,000 fully-vested stock options, with a weighted average exercise price of $3.56 and remaining term of 3.1 years.

The following table summarizes information about stock options outstanding at December 31, 2012:

	Options Outstanding						Options Exercisable
			Weighted		Weighted				Weighted
	Options		Average Remaining		Average Exercise		Options		Average Exercise
Range of Exercise Prices	(in 000’s)		Life in Years		Price		(in 000’s)		Price
$1.01 to $3.00		194		3.4	$	1.74		194	$	1.74
$3.01 to $5.00		155		2.8	$	3.29		155	$	3.29
$5.01 to $7.50		100		3.0	$	7.50		100	$	7.50
Total options		449						449

Total stock-based compensation expense included in wages, salaries and related costs was $7,500 and $88,000 for the year ended December 31, 2012 and 2011, respectively. These compensation expenses were charged to selling, general and administrative expenses. As of December 31, 2012, the Company had no unrecognized compensation expense related to stock option grants, to be recognized over future years.

Additionally, under the 2007 Plan, restricted stock was awarded to the members of the Board of Directors of the Company as partial compensation for Board of Director meeting attendance. Restricted stock compensation expense of $8,600 was recorded during the year ended December 31, 2012. In 2011 the equivalent expense was $6,000.