STOCK BASED COMPENSATION

9 Months Ended

Sep. 28, 2013

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 39- and 13-week periods ended September 28, 2013, the Company recognized approximately $502,000 and $288,000, respectively, in stock-based compensation expense, and for the same periods ended September 29, 2012, the Company recognized approximately $230,000 and $68,000, respectively.  The grant date fair value for stock options is calculated using the Black-Scholes option valuation model.

On February 5, 2013, the Company granted Jay Margolis (its Chief Executive Officer and Chairman of the Board) time-based stock options to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $3.34 which had a weighted average grant date fair value of $1.15.  These options vest in equal installments on the first, second and third anniversary of the grant date. The Company granted no stock options during the 39- and 13-week periods ended September 29, 2012. No excess tax benefits were recognized from the exercise of stock options during the 39- week periods ended September 28, 2013 and September 29, 2012.

The following assumptions were used during the 39-week period ended September 28, 2013:

Expected dividend rate	$	0.00
Expected volatility	50.72		%
Risk free interest rate	0.41		%
Expected lives (years)	3.00

During the first quarter of fiscal 2013, 40,000 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 $94,000, of which approximately $89,000 and $18,000 were included in stock-based compensation expense for the 39- and 13-week periods ended September 28, 2013, respectively. The remaining cost is expected to be recognized over the remainder of fiscal 2013. Comparatively, during the first quarter of fiscal 2012, 14,000 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 $95,000, of which approximately $71,000 and $23,000 were included in stock-based compensation expense for the 39- and 13-week periods ended September 29, 2012, respectively.

During the 39- and 13-week periods ended September 28, 2013, the Company granted restricted stock awards representing 370,000 and 115,000 shares of the Company’s common stock, which had a weighted-average grant date fair value of $4.28 and $5.33 per share, respectively. A portion of these restricted stock awards will contingently vest over a three-year period, based on the Company meeting performance goals, and a portion will vest over the requisite service period.  Comparatively, during the 39- week period ended September 29, 2012, the Company granted 12,000 shares of restricted stock awards of the Company’s common stock, which had a weighted average grant date fair value of $6.70. These restricted shares will contingently vest over a three-year period, based on the Company meeting performance goals. During the 13- week period ended September 29, 2012, the Company granted no restricted stock awards of the Company’s common stock.