STOCK-BASED COMPENSATION

6 Months Ended

Jun. 29, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

The fair value of stock option awards is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. There were no stock options granted in the six month period ended June 29, 2013, or in fiscal year 2012. The fair value of non-vested restricted common stock awards is generally the market value of the Company’s common stock on the date of grant. The non-vested common stock awards require the employee to fulfill certain obligations, including remaining employed by the Company for one, two or four years (the vesting period) and in certain cases also require meeting either performance criteria or the Company’s stock achieving a certain price. For non-vested restricted common stock awards which solely require the recipient to remain employed with the Company, the stock compensation expense is amortized over the anticipated service period. For non-vested restricted common stock awards which require the achievement of performance criteria, the Company reviews the probability of achieving the performance goals on a periodic basis. If the Company determines that it is probable that the performance criteria will be achieved, the amount of compensation cost derived for the performance goal is amortized over the service period. If the performance criteria are not met, no compensation cost is recognized and any previously recognized compensation cost is reversed. The Company recognizes compensation costs on a straight-line basis over the requisite service period for time-vested awards.

In 2011, the Company granted 380,000 shares of phantom stock which will be settled in cash at the end of the first 10 consecutive trading day period following the grant date during which the Company’s common stock trades at a price per share equal to or greater than $5.25, prior to September 12, 2016. The vesting of the awards upon achieving a closing stock price of $5.25 for 10 consecutive days is considered a market condition which requires the Company to periodically assess the fair market value of the award, with increases or decrease in the fair market value being reflected in the statement of operations.

On May 9, 2013, the Compensation Committee of the Company approved the issuances of 1,051,000 shares of non -vested restricted common stock to officers and other employees of the Company which vest at the rate of 20% per year over 5 years if the officer or employee remains with the Company. The Compensation Committee of the Company also approved the issuance of 600,000 shares of non-vested restricted common stock to the Chief Executive Officer (CEO) of the Company which vest if certain performance and market criteria are met and the CEO remains with the Company during the period in which the criteria are met.

A summary of award activity under the stock option plans as of June 29, 2013 and changes during the six month period is as follows (all options were vested as of June 29, 2013):

	Six Months Ended June 29, 2013
	Shares		Weighted Average Exercise Price
Balance, December 29, 2012	983,680		$	5.26
Options forfeited/canceled	(130,346	)	5.60
Options exercised	—		—
Balance, all exercisable, June 29, 2013	853,334		$	5.21

The following table summarizes information about stock options outstanding and exercisable at June 29, 2013:

	Options Outstanding and Exercisable
Range of Exercise Prices	Number Outstanding and Exercisable		Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price
$ 0.01—$ 3.50	130,000		2.00	$	3.49
$ 3.75—$ 4.82	204,350		1.00	3.77
$ 5.00—$ 8.03	418,984		0.30	5.30
$10.00	100,000		1.00	10.00
	853,334		0.81	$	5.21
Aggregate intrinsic value on June 29, 2013	$	29,050

The Company has issued warrants to purchase 200,000 shares of the Company’s stock for $3.49 per share.

Non-Vested Restricted Common Stock

A summary of the activity for non-vested restricted common stock awards as of June 29, 2013 and changes during the six month period is presented below:

	Shares		Weighted Average Grant Fair Value
Balance, December 29, 2012	2,283,048		$	4.76
Granted	2,015,000		3.21
Forfeited	(177,000	)	4.02
Vested	(103,929	)	3.58
Balance, June 29, 2013	4,017,119		$	4.04

Stock-Based Compensation

The following table summarizes stock-based compensation expense within each of the categories below as it relates to non-vested restricted common stock awards for the six months endedJune 29, 2013 and June 30, 2012 (no tax benefits were recognized):

	Six Months Ended
	June 29, 2013		June 30, 2012
Cost of product revenues	$	118,692	$	178,483
Research and development	125,774		132,492
Selling, general and administrative	2,175,062		1,783,141
Total	$	2,419,528	$	2,094,116

Unrecognized compensation expense for non-vested restricted common stock as of June 29, 2013 totaled $7.7 million and is expected to be recognized over a weighted average period of 4 years.