8. STOCK BASED COMPENSATION

9 Months Ended

Sep. 28, 2012

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

8. STOCK BASED COMPENSATION

We approved an option plan in 2008 permitting the grant of 6.4 million stock options to employees for the purpose of attracting and motivating employees, officers and directors, as well as advancing our own interests. Options were granted for a term of three to five years from the date of grant. The vesting schedule varied on options granted with some being fully vested upon grant and others vesting over a period of four years, with 25% vesting on the first anniversary of the date of grant and 25% vesting each anniversary thereafter for the following three years. There were 1,373,000 options vested at September 28, 2012 and 1,439,250 options vested at September 30, 2011.

The following table summarizes our stock options outstanding at December 30, 2011 and changes during the period ended September 28, 2012:

	Number of Shares Under Options			Weighted Average Exercise Price Per Share		Average Fair Value Per Share		Aggregate Intrinsic Value
Outstanding, December 30, 2011		3,092,000		$	0.20	$	0.17	$	993,060
Forfeited		(51,750	)		0.17		0.15		(23,288	)
Expired		(52,250	)		0.17		0.15		(8,880	)
Outstanding, March 30, 2012		2,988,000			0.20		0.17		960,893
Granted		1,875,000			0.41		0.33		656,250
Forfeited		(72,750	)		0.17		0.15		(25,463	)
Expired		(524,250	)		0.31		0.22		(19,365	)
Outstanding, June 29, 2012		4,266,000			0.28		0.22		1,572,315
Forfeited		(4,500	)		0.17		0.15		(1,170	)
Expired		(4,500	)		0.17		0.15		(405	)
Outstanding, September 28, 2012		4,257,000			0.28		0.23	$	1,570,740

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on historical annualized volatility of our stock. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate is based upon the U.S. Treasury yield curve in effect at the time of grant. The assumptions used to calculate the fair value are as follows:

	September 28, 2012
Expected term (years)		5.0
Expected volatility		116.9	%
Dividend yield		0.0	%
Risk-free rate		0.79	%

We recognized share-based compensation expense relating to the vesting of issued stock options of approximately $95,000 and $87,000 for the periods ended September 28, 2012 and September 30, 2011, respectively.

The following table summarizes our nonvested stock options outstanding at December 30, 2011, and changes during the period ended September 28, 2012:

	Number of Options			Weighted Average Exercise Price per Share		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Nonvested, December 30, 2011		1,652,750		$	0.17	$	0.15	$	738,783
Forfeited		(51,750	)		0.17		0.15		(23,288	)
Nonvested, March 30, 2012		1,601,000			0.17		0.15		715,495
Granted		1,875,000			0.41		0.33		656,250
Vested		(510,250	)		0.17		0.15		(89,345	)
Forfeited		(72,750	)		0.17		0.15		(13,095	)
Nonvested, June 29, 2012		2,893,000			0.33		0.27		1,269,305
Forfeited		(4,500	)		0.17		0.15		(405	)
Nonvested, September 28, 2012		2,888,500			0.33		0.27	$	1,268,900

As of September 28, 2012, there was unrecognized share-based compensation expense totaling approximately $476,000 relating to non-vested options that will be recognized over the next 4.6 years.

The following table summarizes information about our stock options outstanding, and reflects the intrinsic value recalculated based on the closing price of our common stock at September 28, 2012:

	Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding		4,257,000	$	0.28		3.45		860,175
Exercisable		1,368,500	$	0.18		2.48		109,165