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STOCK-BASED COMPENSATION
 3 Months Ended
Mar. 31, 2012
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 the period ended March 31, 2012, or in fiscal year 2011. The fair value of non-vested restricted common stock awards is generally the market value of the Company’s equity shares 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. The performance criteria primarily consist of the achievement of the Company’s annual incentive plan goals. 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. The fair market of the awards will be expensed over a derived service period currently estimated to be approximately 12 months. However, if the market condition occurs before the estimated service period of 12 months or if there are material changes in the underlying data used in the fair market valuation, the fair market valuation may increase or decrease and the period over which the fair market valuation is recognized in the statement of operations may increase or decrease.

 

A summary of award activity under the stock option plans as of March 31, 2012 and changes during the three month period is as follows (all options were vested as of March 31, 2012):

 

     Three months ended
March 31, 2012		  
     Shares     Weighted
Average
Exercise
Price		  

Balance, December 31, 2011

      1,903,325      $ 5.07   

Options forfeited/cancelled

      (9,100 )      7.04   

Options exercised

      —          —     
  

 

 

    

 

 

  

Balance, all exercisable, March 31, 2012

      1,894,225      $ 5.06   
  

 

 

    

The following table summarizes information about stock options outstanding and exercisable at March 31, 2012:

 

     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         4.00       $ 3.49   

$  3.75—$  4.82

      1,076,010         1.60         4.45   

$  5.00—$  8.72

      588,215         2.13         5.68   

$10.00—$13.00

      100,000         4.00         10.00   
  

 

 

        
     1,894,225         2.06       $ 5.06   
  

 

 

        

Aggregate intrinsic value on March 31, 2012

    $ 144,638         
  

 

 

        

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 March 31, 2012, 175,000 shares had vested. The intrinsic value of the warrant at March 31, 2012 was $116,000.

Non-Vested Restricted Common Stock

A summary of the activity for non-vested restricted common stock awards as of March 31, 2012 and changes during the three months then ended is presented below:

 

     Shares     Weighted
Average
Grant
Fair
Value		  

Balance, December 31, 2011

      2,897,682      $ 4.20   

Granted

      10,000        3.67   

Forfeited

      (16,219 )      4.38   

Vested

      —          —     
  

 

 

    

Balance, March 31, 2012

      2,891,463      $ 4.20   
  

 

 

    

 

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 three months ended March 31, 2012 and March 26, 2011 (no tax benefits were recognized):

 

     Three Months Ended  
     March 31,
2012		      March 26,
2011		  

Cost of product revenues

    $ 130,337       $ 123,400   

Research and development

      85,330         114,094   

Selling, general and administrative

      868,390         321,639   
  

 

 

     

 

 

  

Total

    $ 1,084,057       $ 559,133   
  

 

 

     

 

 

  

Total unrecognized compensation expense for non-vested restricted common stock as of March 31, 2012 totals $6.7 million and is expected to be recognized over a weighted average period of 3 years.