Stock Based Compensation

9 Months Ended

May 31, 2012

Stock Based Compensation [Abstract]

Stock Based Compensation

Stock Based Compensation

Year 2011 Stock Incentive Plan

In August 2011, we mailed an Information Statement to all of our stockholders of record as of July 29, 2011. The Information Statement disclosed that our Board of Directors had approved, and the holders of a majority of the outstanding shares of our common stock had executed an Action by Written Consent of Stockholders in Lieu of a Special Meeting (the “Written Consent”), approving the adoption of the Year 2011 Stock Incentive Plan (“2011 Plan”).

The purpose of the 2011 Plan is to strengthen the Company by providing an incentive to its employees, officers, consultants and directors and thereby encouraging them to devote their abilities and industry to the success of the Company’s business enterprise. It is intended that this purpose be achieved by extending to employees, officers, consultants and directors of the Company and its subsidiaries an added long-term incentive for high levels of performance and unusual efforts through the grant of incentive stock options, non-qualified stock options, stock appreciation rights, dividend equivalent rights, performance awards and restricted stock. The Company has reserved 15,000,000 shares of common stock for future issuance under the 2011 Plan.

On November 14, 2011, the Compensation Committee granted stock options to purchase an aggregate of 200,000 shares under the 2011 Plan, with a weighted average exercise price of $1.07 to two employees. These stock options will vest based on certain operating performance criteria, and expire after five years. The shares underlying these stock options are registered under the Securities Act of 1933 (the “Securities Act”).

On January 12, 2012, the Compensation Committee granted stock options to purchase 250,000 shares under the 2011 Plan, with an exercise price of $1.10 to the Company’s chief executive officer, Eric K. Chan. These stock options will vest in annual installments of 25 percent beginning on the first anniversary date, and expire after ten years. The shares underlying these stock options are registered under the Securities Act.

On February 6, 2012, the Compensation Committee granted stock options to purchase an aggregate of one million shares under the 2011 Plan, with a weighted average exercise price of $1.00 to various employees. These stock options will vest based on certain operating performance criteria, and expire after five years. The shares underlying these stock options are registered under the Securities Act.

As of May 31, 2012, there remain 1,150,000 shares to be issued upon exercise of outstanding options, and 13,850,000 shares which can be issued under the 2011 Plan after giving effect to shares issued and canceled.

2000 Incentive Plan

The Company’s 2000 Incentive Plan (“2000 Plan”) provides for options and other stock-based awards that may be granted to eligible employees, officers, consultants and non-employee directors of the Company or its subsidiaries. The 2000 Plan does not have a fixed termination date, provided that no incentive stock option can be granted subsequent to August 29, 2011. As of May 31, 2012, there remain 1,802,566 shares to be issued upon exercise of outstanding options, and no new stock options awards will be issued under the 2000 Plan.

The 2011 Plan and the 2000 Plan (the “Plans”) are administered by the Compensation Committee of the Board of Directors (the “Committee”). The Committee has the power to determine which eligible employees will receive awards, the timing and manner of the grant of such awards, the exercise price of stock options (which may not be less than market value on the date of grant), the number of shares, and all of the terms of the awards. The Company may at any time amend or terminate the 2011 Plan. However, no amendment that would impair the rights of any participant with respect to outstanding grants can be made without the participant’s prior consent. Stockholder approval of an amendment to the Plans is necessary only when required by applicable law or stock exchange rules.

Generally, options granted become exercisable in annual installments of 25 percent beginning on the first anniversary date, and expire after five to ten years.

The following table summarizes the stock option activities for the nine months ended May 31, 2012 (share amounts in thousands):

	Shares			Weighted Average Option Exercise Price Per Share		Weighted Average Grant Date Fair Value Per Share		Aggregate Intrinsic Value(1)
Outstanding, August 31, 2011		2,206		$	2.41	$	—	$	—
Granted		1,450			1.03		0.52		—
Exercised		—			—		—		—
Expired or canceled		(703	)		1.67		—		—
Outstanding, May 31, 2012		2,953		$	1.91	$	—	$	—

⁽¹⁾  These amounts represent the difference between the exercise price and the closing price of Dynacq common stock on May 31, 2012 and August 31, 2011, as reported on the NASDAQ stock market, for all in-the-money options outstanding. For exercised options, intrinsic value represents the difference between the exercise price and the closing price of Dynacq common stock on the date of exercise.

For the nine months ended May 31, 2012 and 2011, there were no stock options exercised.

The following summarizes information related to stock options outstanding as of May 31, 2012, and related weighted average price and life information:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Shares		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
	(Share Amounts In Thousands)
$ 1.00 – 1.10		1,150		6.0	$	1.03		—	$	—
$ 1.86		994		9.1		1.86		—		—
$ 2.50 – 2.75		576		1.1		2.54		576		2.54
$ 4.90 – 4.96		233		2.4		4.90		233		4.90
Total		2,953		5.8	$	1.91		809	$	3.22

For the three months ended May 31, 2012 and 2011, stock-based compensation expense associated with the Company’s stock options was $46,136 and $78,369, respectively. For the nine months ended May 31, 2012 and 2011, stock-based compensation expense associated with the Company’s stock options was $196,070 and $82,620, respectively. The total unrecognized compensation expense for outstanding stock options as of May 31, 2012 was $1,126,000, and will be recognized, in general, over 3.5 years. The weighted average time to recognize the compensation expense is 1.8 years.