Note 10.          Stock-based Compensation and Employee Benefit Plans

The Company maintains a 2018 Equity Incentive Plan which provides for the issuance of up to 416,667 shares of common stock upon the exercise of options, stock awards and grants. With the adoption of the 2018 Equity Incentive Plan, no further awards will be issued under the Company’s 2005 Equity Incentive Plan, though all awards under the 2005 Equity Incentive Plan that are outstanding will continue to be governed by the terms, conditions and procedures set forth in the plan and any applicable award agreement.

During the first six months of fiscal year 2022, the Company granted stock options to purchase 39,000 shares of common stock which vest over a four year service period. The weighted average fair value of stock options granted during the first six months of fiscal year 2022 was $185,796. During the first six months of fiscal year 2021, the Company did not grant any stock options. The vested portion of all option grants may be exercised only while the grantee is employed by the Company (or while providing services under a service arrangement in the case of non-employees) or within a certain period after termination of employment or service arrangement in the case of non-employees. 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 September 25, 2021 and March 27, 2021, no SARs have been granted under any option plan.

As of September 25, 2021, there were 102,327 shares of common stock available for issuance of additional awards under the 2018 Equity Incentive Plan. The Company records compensation cost associated with stock-based compensation equivalent to the estimated fair value of the awards over the requisite service period.

Stock Options

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

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 year ended March 27, 2021 and the six month period ended September 25, 2021 is as follows:

As of September 25, 2021, there was $311,496 of total unrecognized compensation cost related to non-vested options. That cost is expected to be recognized over a weighted average period of 1.84 years and will be adjusted for subsequent changes in estimated forfeitures. There were 14,391 options that vested during the quarter ended September 25, 2021, and 15,294 options that vested during the quarter ended September 26, 2020. The total fair value of options vested during the quarters ended September 25, 2021 and September 26, 2020 was $56,140 and $63,167 respectively. There were no options exercised in the six month periods ended September 25, 2021 and September 26, 2020. Share based compensation cost related to stock options recognized in operating results for the six months ended September 25, 2021 and September 26, 2020 totaled $261,678 and $127,000, respectively. 

Restricted Stock

The Company granted 18,000 Restricted Stock Awards (“RSAs”) during the first six months of fiscal 2022 and zero RSAs during the first six months of fiscal 2021. RSAs 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 September 25, 2021, there was $26,886 of total unrecognized compensation cost related to non-vested RSAs. That cost is expected to be recognized over a weighted average period of 0.50 years and will be adjusted for subsequent changes in estimated forfeitures. Compensation cost recognized for RSAs and unrestricted stock awards for the six months ended September 25, 2021 and September 26, 2020 totaled $39,252 and $15,971, respectively.

A summary of the changes in non-vested RSAs outstanding for the six month period ended September 25, 2021 is as follows: