STOCK-BASED COMPENSATION

6 Months Ended

Jul. 02, 2011

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

2. STOCK-BASED COMPENSATION

Stock-based compensation expense for all stock-based awards programs, including grants of stock options, is recorded in accordance with “Compensation-Stock Compensation”, Topic 718 of the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”). During the 26- and 13-week periods ended July 2, 2011, the Company recognized approximately $204,000 and $103,000, respectively, in stock-based compensation expense and for the same periods ended July 3, 2010, the Company recognized approximately $198,000 and $98,000, respectively.  The grant date fair value for stock options is calculated using the Black-Scholes option valuation model. The Company granted no options during the 26 and 13-week periods ended July 2, 2011, as compared to 40,000 options granted during the 26-week period ended July 3, 2010.  No excess tax benefits were recognized from the exercise of stock options during fiscal 2011 and fiscal 2010. During the first quarter of fiscal 2011, 21,200 shares of the Company’s common stock were issued for services to its board members. The total fair value of the issued common stock was approximately $86,000, of which approximately $43,000 and $21,000 were included in stock-based compensation expense for the 26- and 13-week periods ended July 2, 2011, respectively. The remaining cost is expected to be recognized over the remainder of fiscal 2011. Comparatively, during the first quarter of fiscal 2010, 20,000 shares of the Company’s common stock were issued for services to its board members. The total fair value of the issued common stock was approximately $92,000, of which approximately $46,000 and $23,000 were included in stock-based compensation expense for the 26- and 13-week periods ended July 3, 2010, respectively.

During the 26- and 13-week periods ended July 2, 2011, the Company granted restricted stock awards representing 46,000 and 18,000 shares of the Company’s common stock, which had a weighted-average grant date fair value of $4.41 and $4.98 per share, respectively. Comparatively, during the 13-week period ended July 3, 2010, the Company granted restricted stock awards representing 12,000 shares of the Company’s common stock, which had a weighted average grant date fair value of $6.15. Two-thirds of these restricted stock awards will contingently vest over a three-year period, based on the Company meeting performance goals, and one-third will vest equally on an annual basis over the requisite service period. The Company made no grants of restricted stock awards during the first quarter of fiscal 2010.

The weighted-average grant date fair value of options granted during the 26-week period ended July 3, 2010 was $1.79 per option. The grant date fair value is calculated using the Black-Scholes option valuation model. The following assumptions were used during the 26-week period ended July 3, 2010:

Expected dividend rate	$	0.00
Expected volatility	59.53 - 59.61%
Risk free interest rate	1.48 - 1.50%
Expected lives (years)	3.00