Non-Employee Share-Based Compensation

9 Months Ended

Sep. 28, 2013

Non-Employee Share-Based Compensation

Note 7. Non-Employee Share-Based Compensation [Text Block]

Stock Option Plans

At the discretion of management, working with the Compensation Committee, and with approval of the Board of Directors, the Company may grant options to purchase the Company’s common stock to certain individuals from time to time who are not employees of the Company.  These options are granted under the Second Amended and Restated 2007 Equity Incentive Plan of the Company and are granted on the same terms as those being issued to employees.  Stock options granted to non-employees are accounted for using the fair value approach.  The fair value of non-employee option grants are estimated using the Black-Scholes option-pricing model and are re-measured over the vesting term until earned.  The estimated fair value is expensed over the applicable service period.

The following table summarizes activity of stock options granted to non-employees at September 28, 2013 and changes during the nine months then ended:

	Weighted Average
	Number of			Exercise		Remaining Contractual		Aggregate Intrinsic
	Shares			Price		Term		Value
Outstanding at December 29, 2012		1,097,300		$	1.23
Options Granted		-			-
Options Exercised		(250,000	)		0.50
Options Forfeited		-			-
Outstanding at September 28, 2013		847,300		$	1.44		5.98	$	13,700
Exercisable at September 28, 2013		847,300		$	1.44		5.98	$	13,700

The aggregate intrinsic values in the table above are before income taxes, based on the Company’s closing stock price of $0.81 on the last day of business for the period ended September 28, 2013.  The aggregate intrinsic value for options exercised during the nine months ended September 28, 2013 was $35,000.  There were no options exercised during the three months ended September 28, 2013.  There were no options exercised during the three and nine months ended September 29, 2012.

As of September 28, 2013, the Company did not have any unrecognized compensation expense related to non-vested share-based compensation arrangements granted under the plans for non-employee stock options.

Stock Awards

From time to time, the Company awards shares of its common stock to non-employees for services provided or to be provided.  If the fair value of services received is more reliably measurable than the fair value of the stock awarded, the fair value of the services received is used to measure the award.  In contrast, if the fair value of the stock issued is more reliably measurable, than the fair value of services received, the award is measured based on the fair value of the stock awarded.  Since these stock awards are fully vested and non-forfeitable, upon issuance the measurement date for the award is usually reached on the date of the award.  The measured fair value of the award is amortized over the period the service is provided.

During the nine months ended September 28, 2013, the Company awarded an aggregate of 600,000 shares of the Company’s common stock to non-employees.  The Company did not award any shares to non-employees during the three months ended September 28, 2013.  The fair values of the awards were based on the trading price of the Company’s stock on the date of issuance.  The expense the Company recognized for stock awards was $87,322 and $237,571 for the three and nine months ended September 28, 2013, respectively.  As of September 28, 2013, there was $142,953 of total unrecognized compensation expense related to stock awarded to the non-employees.  During the three and nine months ended September 29, 2012, the Company awarded an aggregate of 780,294 and 1,234,851 shares, respectively, and recognized a total expense of $372,721 and $680,897, respectively.

Warrant Awards

During the nine months ended September 28, 2013, the Company recognized an expense of $4,094 for the warrants that were previously awarded during the year ended December 29, 2012.  The Company did not recognize any expense during the three months ended September 28, 2013.  The Company did not award any new warrants during the three and nine months ended September 28, 2013.  As of September 28, 2013, the Company did not have any unrecognized compensation expense related to warrants awarded to the non-employee.

For non-employee share-based compensation, the Company recognized share-based compensation expense of $87,322 and $242,721 in general and administrative expenses in the statement of operations for the three and nine months ended September 28, 2013, respectively. The Company recognized $469,989 and $1,090,689 in share-based compensation expense for the three and nine months ended September 29, 2012, respectively.