Employee Share-Based Compensation

3 Months Ended

Mar. 30, 2013

Employee Share-Based Compensation

Note 6. Employee Share-Based Compensation [Text Block]

Stock Option Plans

At the discretion of the Company’s compensation committee (the “Compensation Committee”), and with the approval of the Company’s board of directors (the “Board of Directors”), the Company may grant options to purchase the Company’s common stock to certain individuals from time to time. Management and the Compensation Committee determine the terms of awards which include the exercise price, vesting conditions and expiration dates at the time of grant. Expiration dates for stock options are not to exceed 10 years from their date of issuance. The Company, under its Second Amended and Restated 2007 Equity Incentive Plan, is authorized to issue stock options that total no more than 20% of the shares of common stock issued and outstanding, as determined on a fully diluted basis.  Beginning in 2007, stock options were no longer issuable under the Company’s 2000 Non-Qualified Incentive Stock Plan.  The remaining amount available for issuance under the Second Amended and Restated 2007 Equity Incentive Plan totaled 6,232,513 at March 30, 2013. The stock option awards generally vest ratably over a four-year period following grant date after a passage of time.  However, some stock option awards are performance based and vest based on the achievement of certain criteria established by the Compensation Committee, subject to approval by the Board of Directors.

The fair value of the Company’s stock options was estimated at the date of grant using the Black-Scholes based option valuation model.  The table below outlines the weighted average assumptions for options granted to employees during the three months ended March 30, 2013.

Three Months Ended March 30, 2013
Volatility		32.64	%
Expected dividends		0.00	%
Expected term	6.1 years
Risk-free rate		1.13	%

The Company calculated expected volatility from the volatility of publicly held companies in similar industries, as the historical volatility of the Company’s common stock does not cover the period equal to the expected life of the options.  The dividend yield assumption is based on the Company’s history and expectation of future dividend payouts on the common stock.  The risk-free interest rate is based on the implied yield available on U.S. treasury zero-coupon issues with an equivalent remaining term.  The expected term of the options represents the estimated period of time until exercise and is based on historical experience of awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior.  The estimation process for the fair value of performance based stock options was the same as for service period based options.

1) Service Period Based Stock Options

The majority of options granted by the Company are comprised of service based options granted to employees.  These options vest ratably over a defined period following grant date after a passage of a service period.

The following table summarizes service period based stock options activity at March 30, 2013 and changes during the three months then ended:

				Weighted Average
						Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding at December 29, 2012		12,202,558		$	1.08
Options Granted		230,000			0.63
Options Exercised		(13,538	)		0.50
Options Expired		(75,000	)		0.50
Options Forfeited		(112,530	)		1.37
Outstanding at March 30, 2013		12,231,490		$	1.08		8.09	$	217,915
Exercisable at March 30, 2013		5,096,949		$	1.26		6.41	$	113,085

The aggregate intrinsic values in the table above are before income taxes, based on the Company’s closing stock price of $0.71 on the last day of business for the period ended March 30, 2013.  The weighted average fair value of options granted during the three months ended March 30, 2013 and March 31, 2012 was $0.22 and $0.31 respectively.  The aggregate intrinsic value for options exercised during the three months ended March 30, 2013 was $2,437.  There were no options exercised during the three months ended March 31, 2012.

2) Performance Based Stock Options

The Company also grants stock option awards that are performance based and vest based on the achievement of certain criteria established from time to time by the Compensation Committee.  If these performance criteria are not met, the compensation expenses are not recognized and the expenses that have been recognized will be reversed.

The following table summarizes performance based stock options activity at March 30, 2013 and changes during the three months then ended:

				Weighted Average
						Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding at December 29, 2012		145,834		$	1.59
Options Granted		200,000			0.63
Options Exercised		-			-
Options Expired		-			-
Options Forfeited		(45,834	)		1.59
Outstanding at March 30, 2013		300,000		$	0.95		9.25	$	16,000
Exercisable at March 30, 2013		45,834		$	1.59		8.10	$	-

The aggregate intrinsic value in the table above are before income taxes, based on the Company’s closing stock price of $0.71 on the last day of business for the period ended March 30, 2013.  The weighted average fair value of options granted during the three months ended March 30, 2013 was $0.22.  We did not grant any performance based stock options during the three months ended March 31, 2012.

As of March 30, 2013, there was $2,201,293 of total unrecognized compensation expense related to non-vested share-based compensation arrangements granted under the plans for employee stock options. That cost is expected to be recognized over a weighted average period of 2.39 years as of March 30, 2013.  The realized tax benefit from stock options for the three months ended March 30, 2013, and March 31, 2012 was $0, based on the Company’s full valuation allowance against its deferred tax assets.

Restricted Stock

Restricted stock awards granted by the Company to employees have vesting conditions that are unique to each award.

The following table summarizes activity of restricted stock awards granted to employees at March 30, 2013 and changes during the three months then ended:

			Weighted Average
			Award-Date
	Shares		Fair Value
Unvested shares at December 29, 2012		500,000	$	0.69
Granted		-		-
Vested		-		-
Forfeited		-		-
Unvested shares at March 30, 2013		500,000	$	0.69
Expected to Vest as of March 30, 2013		500,000	$	0.69

As of March 30, 2013, the Company did not have any unrecognized compensation expense related to restricted stock awards to employees.

For employee share-based compensation, the Company recognized share-based compensation expense of $286,534 in general and administrative expenses in the statement of operations for the three months ended March 30, 2013.  The Company recognized income of $296,135 in share-based compensation for the comparable period in 2012.  The income amount is a result of certain expenses that were reversed due to the forfeiture of certain stock options and restricted stock.