STOCK-BASED COMPENSATION

3 Months Ended

Mar. 29, 2014

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 13-week periods ended March 29, 2014 and March 30, 2013, the Company recognized approximately $310,000 and $137,000, respectively, in stock-based compensation expense.  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. No excess tax benefits were recognized from the exercise of stock options during the first fiscal quarters of 2014 and 2013.

The following assumptions were used during the 13-week period ended March 30, 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 2014, 24,000 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 $115,000, of which approximately $29,000 was included in stock-based compensation expense for the 13-week period ended March 29, 2014. The remaining cost is expected to be recognized over the remainder of fiscal 2014.  Comparatively, 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 $59,000 was included in stock-based compensation expense for the 13-week period ended March 30, 2013.

During the 13-week period ended March 29, 2014, the Company granted restricted stock awards representing 71,000 shares of the Company’s common stock, which had a weighted-average grant date fair value of $5.48 per share. 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 13- week period ended March 30, 2013, the Company did not grant any stock awards.