SHARE BASED COMPENSATION

6 Months Ended

Jul. 04, 2015

5.SHARE BASED COMPENSATION

The Company is authorized to issue up to 3,000,000 shares for equity awards under the Company’s 2006 Performance Equity Plan (“2006 Plan”) and 1,100,000 shares for equity awards under the Company’s 2012 Incentive Compensation Plan (“2012 Plan”). The Company’s stockholders approved an increase in the number of shares available under the 2012 Plan from 500,000 to 1,100,000 shares on August 13, 2014.

Under the 2006 Plan and 2012 Plan, awards may be granted to participants in the form of non-qualified stock options, incentive stock options, restricted stock, deferred stock, restricted stock units and other stock-based awards. Subject to the provisions of the plans, awards may be granted to employees, officers, directors, advisors and consultants who are deemed to have rendered or are able to render significant services to the Company or its subsidiaries and who are deemed to have contributed or to have the potential to contribute to the Company’s success. The Company accounts for options under the fair value recognition standard. The application of this standard resulted in share-based compensation expense for the three months ended July 4, 2015 and June 30, 2014 of $245 and $290, respectively, and share-based compensation expense for the six months ended July 4, 2015 and June 30, 2014 of $419 and $543, respectively. Stock based compensation expense is included in selling, general and administrative expenses.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the table below. The Company uses the simplified method to estimate the expected term of the options, but used an estimate for grants of “plain vanilla” stock options based on a formula prescribed by the Securities and Exchange Commission. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Share-based compensation expense recognized in the consolidated financial statements in 2015 and 2014 is based on awards that are ultimately expected to vest.

As of July 4, 2015, there were 1,996,533 stock options outstanding and 239,790 unvested restricted shares outstanding.

During the six months ended July 4, 2015, the Company granted 465,750 stock options and granted 153,635 shares of restricted stock, respectively. The following table summarizes the weighted average assumptions used for stock options granted during the six months ended July 4, 2015 and June 30, 2014.

	2015		2014
Expected life (in years)	5.3		4.8
Risk-free interest rate	1.66	%	1.72	%
Volatility	62.7	%	63.1	%
Dividend yield	0	%	0	%
Forfeiture rate	10.9	%	12.9	%

As of July 4, 2015, there are 189,109 shares available to grant under the 2006 Plan and 227,125 shares available to grant under the 2012 Plan.