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STOCK-BASED COMPENSATION
 6 Months Ended
Jun. 25, 2011
STOCK-BASED COMPENSATION

6. 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 fiscal years 2011 and 2010. The fair value of nonvested restricted common stock awards is generally the market value of the Company’s equity shares on the date of grant. The nonvested 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 meeting performance criteria. The performance criteria primarily consist of the achievement of the Company’s annual incentive plan goals. For nonvested 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 nonvested 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. For awards that vest based on performance conditions, the Company uses the accelerated model for graded vesting awards.

A summary of award activity under the stock option plans as of June 25, 2011 and changes during the six month period is as follows. All options were vested as of June 25, 2011.

 

     Six months ended
June 25, 2011		  
     Shares     Weighted
Average
Exercise
Price		  

Balance, December 25, 2010

      2,899,261      $ 6.45   

Options granted

      —          —     

Options forfeited/cancelled

      (735,565 )      8.43   

Options exercised

      (19,700 )      3.68   
  

 

 

    

 

 

  

Balance, June 25, 2011

      2,143,996      $ 5.79   
  

 

 

    

Exercisable, June 25, 2011

      2,143,996     
  

 

 

    

The following table summarizes information about stock options outstanding and exercisable at June 25, 2011:

 

     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         5.00       $ 3.49   

$ 3.75—$ 4.82

      1,080,555         2.60         4.45   

$ 5.00—$ 9.39

      732,997         2.74         6.36   

$10.00—$13.00

      100,100         5.00         10.00   

$14.31—$16.16

      100,344         1.00         14.87   
  

 

 

        
     2,143,996         2.83       $ 5.79   
  

 

 

        

Aggregate intrinsic value on June 25, 2011

    $ 605,988         
  

 

 

        

In June 2010 the Company issued a warrant to purchase 200,000 shares of the Company’s stock at $3.49. The warrant vests ratably over a two year period and, as of June 25, 2011, 100,000 shares had vested. The intrinsic value of the warrant at June 25, 2011 was approximately $272,000.

NonVested Restricted Common Stock

A summary of the activity for nonvested restricted common stock awards as of June 25, 2011 and changes during the six months then ended is presented below:

 

     Shares     Weighted
Average
Grant
Fair Value		  

Balance, December 25, 2010

      2,033,607      $ 3.79   

Granted

      972,012        4.23   

Forfeited

      (1,125 )      2.75   

Vested

      (63,125 )      3.24   
  

 

 

    

Balance, June 25, 2011

      2,941,369      $ 3.95   
  

 

 

    

 

Stock-Based Compensation

The following table summarizes stock-based compensation expense within each of the categories below as it relates to employee stock options and nonvested restricted common stock awards for the six months ended June 25, 2011 and June 26, 2010 (no net tax benefits were recognized):

 

     Six Months Ended  
     June 25,
2011		      June 26,
2010		  

Cost of product revenues

    $ 296,866       $ 292,082   

Research and development

      288,969         183,570   

Selling, general and administrative

      884,689         698,442   
  

 

 

     

 

 

  

Total

    $ 1,470,524       $ 1,174,094   
  

 

 

     

 

 

  

The total unrecognized compensation cost related to nonvested restricted common stock awards is expected to be recognized over a weighted average period of 3 years. The total unrecognized compensation cost at June 25, 2011 is $6.1 million.