NOTE 12 - STOCK COMPENSATION PLANS

12 Months Ended

Dec. 29, 2012

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

NOTE 12 - STOCK COMPENSATION PLANS

Stock Options - The Company's 1998 Incentive Plan (the “Option Plan”) that provided for the issuance of options to acquire up to 3,250,000 shares of common stock expired in June 2008. The Option Plan provided for grants of non-statutory options, incentive stock options, restricted stock awards and stock appreciation rights. All stock option grants were for a ten-year term. Stock options issued to executives and management generally vested over a four-year period, one-fifth at grant date and one-fifth at December 31 of each year until they are fully vested. Stock options issued to directors under the Option Plan vested quarterly over a one-year period. In 2007, no stock options were granted to employees. At the 2007 Annual Meeting of Directors, grants of stock options were approved for 50,000 shares to each non-employee director. In 2008, options were granted to employees to acquire 140,000 shares. All stock options granted had a strike price equal to the market value of the Company's stock on the date of the grant by the Compensation Committee of the Board of Directors.

In June 2009, the Company's stockholders approved a new 2009 Equity Incentive Plan (the “Equity Plan”) that provides for the issuance of up to 480,000 shares of common stock. The Equity Plan provides for grants of non-statutory options, incentive stock options, restricted stock awards, performance shares, performance units, restricted stock units and other stock-based awards. Grants to employees will generally vest over a four-year period, one-fourth at December 31 of each year until they are fully vested. Grants to non-employee directors will vest quarterly over a one-year period coinciding with their service term.

On April 26, 2012, the Board approved, and the shareholders subsequently ratified, an amendment to the Plan to increase the number of shares available for issuance under the Plan by 500,000 from 480,000 to 980,000, in order to enhance the ability of ENGlobal to motivate current employees, to attract employees of outstanding ability and to provide for grants to be made to non-employee directors.  

The Company recognizes stock compensation expense relating to share-based payments in net income using the fair-value measurement method. Under the fair value method, the estimated fair value of awards is charged to expense over the requisite service period, which is generally the vesting period.The Company did not grant any stock options in 2012 or 2011.

We estimate the volatility of our stock price by using historical volatility looking back 156 weeks. We have considered using a combination of historical and implied volatility derived from traded options on our stock but do not believe that it would materially impact the Company's estimates of future volatility over the expected life of the options. The expected term of options granted has been derived from the simplified method, due to changes in vesting terms and contractual lives of current options compared to our historical grants. We base the estimate of the risk-free interest rate on the United States Treasury zero-coupon yield curve in effect at the time of grant. We have never paid cash dividends and do not currently intend to pay cash dividends; accordingly, we have assumed a 0% dividend yield.

The following table summarizes activity for the period December 31, 2010 through December 29, 2012:

	Vested & Exercisable Balance		Number of Shares Outstanding			Weighted Average Exercise Price
Balance at December 31, 2010		891,000		915,000			7.14
Exercised				(20,000	)		1.13
Canceled or expired				(125,000	)		9.69
Balance at December 31, 2011		750,000		770,000			6.81
Canceled or expired				(142,000	)		5.13
Balance at December 29, 2012		628,000		628,000			7.26

The following table summarizes information concerning outstanding and exercisable Company stock options at December 29, 2012:

Exercise Prices * (series)		Options Outstanding		Average Remaining Contractual Life		Options Fully-Vested And Exercisable
$	1.81		40,000		2.5		40,000
$	1.87		20,000		1.3		20,000
$	2.32		40,000		1.4		40,000
$	3.75		150,000		3.5		150,000
$	9.15		150,000		4.4		150,000
$	11.97		18,000		4.3		18,000
$	10.93		150,000		5.5		150,000
$	9.44		60,000		6.2		60,000
			628,000				628,000

* The exercise price indicates the market value at grant date and is the strike price at exercise. For each series, the exercise price is the weighted average exercise price of the series.

Restricted Stock Awards - Restricted stock awards granted to directors are intended to compensate and retain the directors over the one-year service period commencing July 1 of the year of service. These awards will vest in quarterly installments beginning September 30 of the year of service, so long as the grantee continues to serve as a director of the Company. Restricted stock awards granted to employees will vest in four equal annual installments beginning December 31 in the year granted, so long as the grantee remains employed full-time with the Company as of each vesting date. The following is a summary of the Company's restricted stock awards for the years ended December 31, 2011 and December 29, 2012:

	Number of restricted shares			Weighted- average fair value
Unvested restricted shares at December 31, 2010		122,507		$	2.60
Granted in 2011		144,989		$	3.14
Vested in 2011		(102,927	)	$	3.36
Forfeited in 2011		(18,750	)	$	3.09
Unvested restricted shares at December 31, 2011		145,819		$	2.90
Granted in 2012		301,007		$	1.00
Vested in 2012		(214,248	)	$	1.87
Forfeited in 2012		(65,372	)	$	2.84
Unvested restricted shares at December 29, 2012		167,206		$	0.86

The total fair value of the restricted stock that vested in the years ended December 31, 2012 and December 29, 2011 was $184,000 and $299,000, respectively. The weighted-average remaining life of restricted stock awards outstanding at December 29, 2012 was 1.86 years.

During 2011 and 2012, the Company granted restricted stock awards per the following table.

Date Issued	Issued to	Number of Individuals	Number of Shares	Market Price		Fair Value
June 16, 2011	Employee	1	22,866	$	3.28	$	75,000
June 16, 2011	Director	3	73,170	$	3.28	$	240,000
November 7, 2011	Employee	9	48,953	$	2.86	$	140,000
June 14, 2012	Director	3	100,671	$	1.49	$	150,000
June 14, 2012	Employee	1	50,336	$	1.49	$	75,000
December 18, 2012	Employee	1	150,000	$	0.50	$	75,000

Compensation Expense - The Company recognized non-cash compensation expense related to its stock compensation plans of $0.4 million and $0.5 million for the fiscal years ended December 29, 2012 and December 31, 2011, respectively. As of December 29, 2012, unrecognized compensation expense was approximately $144,000. The weighted average period over which total compensation related to stock options and restricted stock awards are expected to be recognized is approximately 13 months.