9.	Computation of Basic and Diluted Net Income Per Common Share

Basic net income per share is computed by dividing net income for the period by the weighted average number of shares outstanding during the period. Diluted net income per share is computed by dividing net income for the period by the weighted average number of shares, plus common stock equivalents outstanding during the period which includes 1,000,000 shares of common stock issuable upon the conversion of 500,000 shares of convertible Series A Preferred Stock. Common stock equivalents also include the effect of outstanding dilutive stock options and awards computed using the treasury stock method.

A reconciliation of the numerator and denominator of basic and diluted net income per common share is provided as follows (in thousands, except per share amounts):


	Three Months Ended				Six Months Ended
	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Numerator:
Net income	$	909	$	814	$	1,475	$	1,299
Denominator:
Basic weighted average shares outstanding		8,961		8,965		8,962		8,907
Effect of dilutive preferred shares		1,000		1,000		1,000		1,000
Effect of dilutive stock options and awards		258		221		249		176
Effect of dilutive contingent shares		12		11		12		11

Diluted weighted average shares outstanding		10,231		10,197		10,223		10,094

Basic net income per common share	$	0.10	$	0.09	$	0.16	$	0.15

Diluted net income per common share	$	0.09	$	0.08	$	0.14	$	0.13

The Company excludes options from the computation of diluted weighted average shares outstanding if the exercise price of the options is greater than the average market price of the shares because the inclusion of these options would be anti-dilutive to earnings per share. Accordingly, for the three months ended July 2, 2011 and July 3, 2010, respectively, stock options to purchase 604,256 and 764,073 shares were excluded from the computation of diluted weighted average shares outstanding. For the six months ended July 2, 2011 and July 3, 2010, respectively, stock options to purchase 662,691 and 836,061 shares were excluded from the computation of diluted weighted average shares outstanding.