Quarterly report pursuant to Section 13 or 15(d)

Note 7 - Share-based Compensation

v2.4.1.9
Note 7 - Share-based Compensation
9 Months Ended
Dec. 27, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

(7)     Share Based Compensation


The Company has established the 2000 Stock Option Plan and the 2005 Equity Incentive Plan, which provide for the granting of options and restricted stock for up to 2,250,000 shares of common stock at 100% of fair market value at the date of grant, with each grant requiring approval by the Board of Directors of the Company. Option grants under the 2000 Stock Option Plan are no longer available. Options granted generally vest in one or more installments in a four or five year period and must be exercised while the grantee is employed by the Company or within a certain period after termination of employment. Options granted to employees shall not have terms in excess of 10 years from the grant date. Holders of options may be granted stock appreciation rights (SARs), which entitle them to surrender outstanding awards for a cash distribution under certain changes in ownership of the Company, as defined in the stock option plan. As of December 27, 2014, no SAR’s have been granted under the option plan. As of December 27, 2014, the total number of shares of common stock available for issuance is 475,650. All outstanding options have either a five year or a ten year life. The Company records compensation cost associated with share-based compensation equivalent to the estimated fair value of the awards over the requisite service period. There were 35,000 options granted in the third quarter of fiscal 2015 and options for 264,500 granted in the first nine months of fiscal 2015 with weighted average grant date fair values of $1.23 and $1.68 per share, respectively. There were options for 35,000 shares granted in the third quarter of fiscal 2014 and options for 430,750 shares granted in the first nine months of fiscal 2014 with weighted average grant date fair values of $1.05 and $1.09 per share, respectively.


Included in the options granted during fiscal 2014 are performance-based options for 100,000 shares granted as an inducement to an employee which were outside the 2005 plan. A portion of the options vest following the filing of the Company’s Form 10-K for fiscal 2015 provided certain bookings goals are achieved by the Company. No compensation cost had been recognized for these stock options through the first quarter of fiscal 2015 or during fiscal 2014 because management believed it was not probable that the performance criteria would be met. During the second quarter of fiscal 2015, management’s assessment changed as it now appears probable that the criteria will be met. The expense of $39,000 will be recognized ratably over the remaining vesting period. For the third quarter of fiscal 2015, $10,000 was recognized as compensation expense.


In calculating compensation related to stock option grants, the fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option-pricing model and the following weighted average assumptions:


   

Three Month Periods Ended

   

Nine Month Periods Ended

 
   

December 27,

   

December 28,

   

December 27,

   

December 28,

 
   

2014

   

2013

   

2014

   

2013

 

Dividend yield

                       

Expected volatility

    93.03 %     88.38 %     91.68 %     86.33 %

Risk-free interest rate

    1.62 %     1.37 %     1.65 %     1.02 %

Expected term (years)

    8.36       8.36       8.36       7.91  

The computation of expected volatility used in the Black-Scholes-Merton option-pricing model is based on the historical volatility of the Company’s share price. The expected term is estimated based on a review of historical employee exercise behavior with respect to option grants. The risk-free interest rate is based on the U.S. Treasury rates with maturity similar to the expected term of the option on the date of grant.


A summary of the changes in stock options outstanding for the nine month period ended December 27, 2014 and the fiscal year ended March 29, 2014 is as follows:


           

Weighted

   

Weighted Average

   

Aggregate

 
           

Average

   

Remaining Contractual

   

Intrinsic

 
   

Shares

   

Exercise Price

   

Terms (Years)

   

Value

 

Outstanding at March 30, 2013

    1,556,250     $ 1.62       6.8     $ 252  

Granted

    430,750       1.32                  

Exercised

                           

Forfeited / Expired

    248,250       1.72                  

Outstanding at March 29, 2014

    1,738,750     $ 1.53       6.8     $ 113  

Granted

    264,500     $ 2.04                  

Exercised

    76,500     $ 1.89                  

Forfeited / Expired

    167,900     $ 1.72                  

Outstanding at December 27, 2014

    1,758,850     $ 1.58       6.9     $ 217  
                                 

Exercisable at December 27, 2014

    626,475     $ 1.67       5.9     $ 57  
                                 

At December 27, 2014, expected to vest in the future

    778,448     $ 1.53       7.5     $ 106  

As of December 27, 2014, there was $765,000 of total unrecognized compensation cost related to non-vested options. That cost is expected to be recognized over a weighted average period of 3.1 years. There were 71,750 options that vested during the quarter ended December 27, 2014. There were 74,050 options that vested during the quarter ended December 28, 2013. The total grant date fair value of options vested during the quarters ended December 27, 2014 and December 28, 2013 was $97,000 and $100,000, respectively. There were 231,150 options that vested during the nine month period ended December 27, 2014. There were 241,025 options that vested during the nine month period ended December 28, 2013. The total grant date fair value of options vested during the nine month periods ended December 27, 2014 and December 28, 2013 was $280,000 and $303,000, respectively. No shares were exercised in the three month periods ended December 27, 2014 and December 28, 2013. Options of 76,500 shares were exercised in the nine month period ended December 27, 2014 and no shares were exercised in the nine month period ended December 28, 2013. Share based compensation cost recognized in operating results for the three month periods ended December 27, 2014 and December 28, 2013 totaled $103,000 and $36,000, respectively. Share based compensation cost recognized in operating results for the nine month periods ended December 27, 2014 and December 28, 2013 totaled $280,000 and $316,000, respectively.


During the nine months ended December 28, 2013, the vesting for 40,000 options was accelerated in connection with a termination agreement with a former employee. This modification did not result in any incremental compensation expense, however $38,000 of stock-based compensation expense was accelerated and recognized during the nine months ended December 28, 2013.


During the nine months ended December 27, 2014, 25,000 options were exercised by certain members of the Company’s Board of Directors. No options were exercised by Board members in Fiscal 2014.


Restricted Stock


The Company granted 187,000 shares of restricted stock during the first nine months of fiscal 2015 to the members of the Board of Directors in lieu of cash compensation for services to be performed in fiscal 2015. The weighted average grant date fair value was $2.47. The Company granted 71,500 shares of restricted stock during the first nine months of fiscal 2014 to certain members of the Board of Directors in lieu of cash compensation for services to be performed in fiscal 2014. The weighted average grant date fair value was $1.53 per share. The Company also granted 30,000 shares of unrestricted stock during the first nine months of fiscal 2014 as part of a severance agreement with a former employee. The 30,000 shares did not have a restriction period because they vested immediately on the grant date, but are included in the roll forward schedule of restricted stock below because they were granted under the 2005 Plan. The restricted stock awards are considered fixed awards as the number of shares and fair value at the grant date is amortized over the requisite service period net of estimated forfeitures.


As of December 27, 2014, there was $262,000 of total unrecognized compensation cost related to non-vested restricted awards. That cost is expected to be recognized over a weighted average period of 0.5 years. Compensation cost was recognized for the restricted and unrestricted stock awards for the three and nine month periods ended December 27, 2014 totaling $131,000 and $265,000, respectively. These amounts include $16,000 and $32,000 for the three and nine months ended December 27, 2014 for performance awards based on bookings for which probability of attainment appears likely. Compensation cost was recognized for the restricted and unrestricted stock awards for the three and nine month periods ended December 28, 2013 totaling $31,000 and $79,000, respectively. No amounts were included for performance awards based on bookings as their probability of attainment did not appear likely at that time.


A summary of the changes in non-vested restricted stock awards outstanding at December 27, 2014 and at March 29, 2014 is as follows:


           

Weighted

 
           

Average Grant

 
   

Shares

   

Date Fair Value

 

Non-vested at March 30, 2013

    50,000     $ 1.18  

Granted

    101,500       1.53  

Vested

    30,000       1.53  

Forfeited or cancelled

           

Non-vested at March 29, 2014

    121,500     $ 1.39  

Granted

    187,000       2.47  

Vested

    71,500       1.53  

Forfeited or cancelled

           

Non-vested at December 27, 2014

    237,000     $ 2.20