NOTE 4 – SHAREHOLDERS’ EQUITY

In the first quarter of fiscal 2010 the Company adopted the 2009 Incentive Plan (the “2009 Plan”). This plan replaced the Company’s 1993 Stock Incentive Plan, the 1996 Stock Incentive Plan, the 1999 Non-Qualified Stock Option Plan, the 2007 New Hire Incentive Plan, the Clarity Visual Systems, Inc. 1995 Plan and Non-Qualified Stock Option Plan as well as any individual inducement awards, which are collectively referred to as the “Prior Plans.” The 2009 Plan authorizes the issuance of 1,300,000 shares of common stock. In addition, up to 2,963,375 shares subject to awards outstanding under the Prior Plans at the time the 2009 Plan was approved became available for issuance under the 2009 Plan to the extent that these shares cease to be subject to the original awards (such as by expiration, cancellation or forfeiture of the awards). In the fourth quarter of 2012, shareholders approved an amendment to the 2009 Plan, authorizing the issuance of an additional 1,700,000 shares of common stock. The maximum number of shares that may be issued under the 2009 Plan is 5,963,375 shares, including shares available from the Prior Plans.

Stock Options

The 2009 Plan provides for the granting of stock options, which generally vest and become exercisable over a three-year period and expire seven to ten years after the date of grant. Options were last granted in the third quarter of fiscal 2008.

Information regarding outstanding options is as follows:


	Number of Shares			Weighted Average Exercise Price
Options outstanding at September 27, 2013		787,674		$	9.35
Granted		—			—
Exercised		—			—
Forfeited		—			—
Expired		(212,908	)		11.45

Options outstanding at June 27, 2014		574,766		$	8.57

All options outstanding at June 27, 2014 were exercisable. As of June 27, 2014, the total pretax intrinsic value of options outstanding and options exercisable was $0 and the options had a weighted average remaining contractual term of 1.2 years.

Restricted Stock

The 2009 Plan provides for the issuance of restricted stock (“nonvested shares” per ASC Topic 718, “Compensation – Stock Compensation”). Shares issued generally vest over a one to three year period upon the passage of time, or upon meeting objective performance conditions.

Information regarding outstanding restricted stock awards is as follows:


	Number of Shares			Weighted Average Grant Date Fair Value
Restricted stock outstanding at September 27, 2013		1,417,509		$	1.86
Granted		943,000			2.17
Vested		(589,135	)		1.78
Forfeited		(38,533	)		1.87

Restricted stock outstanding at June 27, 2014		1,732,841		$	2.05

Employee Stock Purchase Plan

The 2004 Employee Stock Purchase Plan (“the Plan”) provides that eligible employees may contribute, through payroll deductions, up to 10% of their earnings toward the purchase of the Company’s Common Stock at 85% of the fair market value at specific dates. The fair value of the purchase rights is estimated on the first day of the offering period using the Black-Scholes model. As of June 27, 2014, approximately 500,000 shares remained available for purchase under the Plan.

Valuation and Expense Information

The following table summarizes share based compensation expense related to share based payment awards and employee stock purchases for the three and nine months ended June 27, 2014 and June 28, 2013. The expense was allocated as follows:


	Three months ended				Nine months ended
	Jun. 27, 2014		Jun. 28, 2013		Jun. 27, 2014		Jun. 28, 2013
Cost of sales	$	27	$	22	$	73	$	75

Research and development, net	$	15	$	—	$	34	$	82
Sales and marketing		55		61		141		212
General and administrative		259		208		896		791

Share based compensation expense included in operating expenses	$	329	$	269	$	1,071	$	1,085

Share based compensation expense related to employee stock options, restricted stock awards and employee stock purchase plan	$	356	$	291	$	1,144	$	1,160

The Company recognizes compensation expense for all share based payment awards made to its employees and directors including employee stock options, restricted stock awards and employee stock purchases related to the Employee Stock Purchase Plan, based on estimated fair values. The Company calculates the value of employee stock options on the date of grant using the Black-Scholes model. This model is also used to estimate the fair value of employee stock purchases related to the Employee Stock Purchase Plan. The Company values restricted stock awards at the closing price of the Company’s shares on the date of grant. As share based compensation expense recognized in the Consolidated Statement of Operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures were estimated based on historical and anticipated future experience.