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Stock-Based Compensation | 6 Months Ended
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Mar. 28, 2023
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation |
Note 5. | Stock-Based Compensation
The Company has traditionally maintained incentive compensation plans that include provision for the issuance of equity-based awards. The Company established the 2008 Omnibus Equity Incentive Compensation Plan in 2008 (the “2008 Plan”) and has outstanding awards that were issued under the 2008 Plan. Subsequently, the 2008 Plan expired in 2018 and the Company established a new plan, the 2018 Omnibus Equity Incentive Plan (the “2018 Plan”) during the 2018 fiscal year, which was approved by shareholders on May 24, 2018. Future awards will be issued under the 2018 Plan. On February 8, 2022 the Company’s shareholders approved a proposal to increase the number of shares available for issuance under the 2018 Plan from 900,000 to 1,050,000, which currently represents the maximum number of shares available for issuance under the 2018 Plan. Stock-based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite service period (generally the vesting period of the grant). The Company recognizes the impact of forfeitures as forfeitures occur. Our net income (loss) for the two quarters ended March 28, 2023 and March 29, 2022 includes $89,000 and $147,000, respectively, of compensation costs related to our stock-based compensation arrangements. Stock Option awards The Company measures the compensation cost associated with stock option awards by estimating the fair value of the award as of the grant date using the Black-Scholes pricing model. The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the Company’s stock options and stock awards granted during the two quarters ended March 28, 2023. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the employees who receive equity awards. There were 20,000 incentive stock options awarded during the two quarters ended March 28, 2023 to the Company’s Chief Executive Officer from available shares under the 2018 Plan, with an exercise price of $3.00 per share and a per share weighted average fair value of $2.29. During the two quarters ended March 29, 2022, the Company granted 90,000 incentive stock options to its Chief Executive Officer, from available shares under the 2018 Plan, with an exercise price of $2.33 per share and a per share weighted average fair value of $1.24 pursuant to the Chief Executive Officer’s Second Amended and Restated Employment Agreement dated December 24, 2020. In addition to the exercise and grant date prices of the stock option awards, certain weighted average assumptions that were used to estimate the fair value of stock option grants are listed in the following table:
|  | Two Quarters Ended March 28, 2023 Incentive and Non-Qualified Stock Options |  |  | Two Quarters Ended March 29, 2022 Incentive and Non-Qualified Stock Options |
Expected term (years) |  |  | 7.5 |  |  |  | 6.5 |
Expected volatility |  |  | 60.2% |  |  |  | 61.3% |
Risk-free interest rate |  |  | 4.21% |  |  |  | 1.8% |
Expected dividends |  |  | - |  |  |  | - |
We estimate expected volatility based on historical weekly price changes of our common stock for a period equal to the current expected term of the options. The risk-free interest rate is based on the United States treasury yields in effect at the time of grant corresponding with the expected term of the options. The expected option term is the number of years we estimate that options will be outstanding prior to exercise considering vesting schedules and our historical exercise patterns. The following table summarizes stock option activity for the two quarters ended March 28, 2023 under all plans:
|  | Shares |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Life (Yrs) |
Outstanding at beginning of year |  |  | 470,161 |  |  | $ | 3.97 |  |  |  |  |
Options granted |  |  | 20,000 |  |  | $ | 3.00 |  |  |  |  |
Options exercised |  |  | (2,000 | ) |  | $ | 2.31 |  |  |  |  |
Options Forfeited |  |  | (12,253 | ) |  | $ | 3.95 |  |  |  |  |
Outstanding March 28, 2023 |  |  | 475,908 |  |  | $ | 3.94 |  |  |  | 5.5 |
Exercisable March 28, 2023 |  |  | 334,965 |  |  | $ | 3.67 |  |  |  | 4.7 |
As of March 28, 2023, the aggregate intrinsic value of the outstanding and exercisable options was $177,000. Only options whose exercise price is below the current market price of the underlying stock are included in the intrinsic value calculation. As of March 28, 2023, the total remaining unrecognized compensation cost related to non-vested stock options was $164,000 and is expected to be recognized over a weighted average period of approximately 2.0 years. There were 2,000 stock options exercised that resulted in an issuance of 2,000 shares during the two quarters ended March 28, 2023 with proceeds of approximately $5,000. There were 23,797 stock options exercised that resulted in an issuance of 23,797 shares during the two quarters ended March 29, 2022 with proceeds of approximately $90,000. Restricted Stock Units There were 25,750 restricted stock units granted during the two quarters ended March 28, 2023 and there were 28,000 restricted stock units granted during the two quarters ended March 29, 2022. A summary of the status of non-vested restricted stock units as of March 28, 2023 is presented below.
|  | Shares |  |  | Grant Date Fair Value Per Share |
Non-vested units at beginning of year |  |  | 73,336 |  |  | $1.54 to $4.50 |
Units granted |  |  | 25,750 |  |  | $2.29 |
Units vested |  |  | (46,336 | ) |  | $1.54 |
Units forfeited |  |  | (1,000 | ) |  | $4.50 |
Non-vested units at March 28, 2023 |  |  | 51,750 |  |  | $2.29 to $4.50 |
As of March 28, 2023, there was $123,000 of total unrecognized compensation cost related to non-vested restricted stock units. This cost is expected to be recognized over a weighted average period of approximately 2.2 years. Restricted and Unrestricted Common Stock Awards No grants of restricted or unrestricted common stock were made during the two quarters ended March 28, 2023. During the two quarters ended March 29, 2022 there were 9,256 unrestricted shares of common stock granted to directors of the Company. These shares had a grant date fair value of $4.35 per share and resulted in the recognition of $40,000 of stock-based compensation expense.

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