NOTE G - STOCK-BASED COMPENSATION PLANS:

 

The 2025 Long Term Incentive Plan (the “2025 LTIP”) was approved by the Company’s shareholders on December 9, 2025 and became effective December 10, 2025. Officers, employees and non-employee directors of the Company are eligible to receive awards under the 2025 LTIP. A total of 1,500,000 shares of common stock are authorized for issuance under the 2025 LTIP. Awards authorized under the 2025 LTIP include incentive stock options, non-qualified stock options, restricted shares, restricted stock units and rights (either with or without accompanying options). The 2025 LTIP provides for options to be granted at market value of the stock on the date of grant and have exercise periods determined by the Compensation Committee of the board of directors. The Compensation Committee may also determine the vesting periods, performance criteria and other terms and conditions of all awards under the 2025 LTIP. The Compensation Committee has adopted resolutions under the 2025 LTIP automatically granting to each non-employee director on the first day of each fiscal year options to purchase twice the number of shares of common stock acquired during the previous fiscal year, up to a maximum of 40,000 shares. Such options are exercisable at the market value of the stock on the first day of the fiscal year, vest six months from the date of grant and expire 10 years from the date of grant. The 2015 LTIP expired by its terms on June 1, 2025.

 

Stock-based compensation expense is included in general and administrative expense in the accompanying Consolidated Statements of Income.

 

Stock Options:

 

A summary of stock option transactions under all of the Company’s stock option plans and information about fixed-price stock options is as follows:

 

The intrinsic value of options outstanding at June 28, 2026 was $94 thousand.

 

The following table provides information on options outstanding and options exercisable as of June 28, 2026:

 

 

The following table provides information on options outstanding and options exercisable as of June 29, 2025:

 

 

The following table provides information on options outstanding and options exercisable as of June 30, 2024:

 

 

Stock options issued during the years ended June 28, 2026, June 29, 2025, and June 30, 2024 were zero, zero, and zero, respectively.

 

We determine fair value following the authoritative guidance as follows:

 

Valuation and Amortization Method. We estimate the fair value of share-based awards granted using the Black-Scholes option valuation model. We amortize the fair value of all awards on a straight-line basis over the requisite service periods, which are generally the vesting periods.

 

Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. Unless a life is specifically stated, we determine the expected life using the “simplified method” in accordance with Staff Accounting Bulletin No. 110 since we do not have sufficient historical share option exercise experience.

 

Expected Volatility. Using the Black-Scholes option valuation model, we estimate the volatility of our common stock at the date of grant based on the historical volatility of our common stock.

Risk-Free Interest Rate. We base the risk-free interest rate used in the Black-Scholes option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.

 

Expected Dividend Yield. We have not historically paid any cash dividends on our common stock and we currently do not anticipate paying any cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero in the Black-Scholes option valuation model.

 

Expected Forfeitures. We use historical data to estimate pre-vesting option forfeitures. We record stock-based compensation only for those awards that are expected to vest.

 

Stock compensation expense related to stock options recognized in either fiscal 2026, 2025, or 2024 was zero, zero, and zero, respectively. There were no stock options that were unvested at June 28, 2026 or June 29, 2025. There was zero unamortized stock compensation expense at June 28, 2026.

 

Restricted Stock Units:

 

Restricted stock units awarded under the 2015 LTIP and 2025 LTIP represent the right to receive shares of common stock upon the satisfaction of vesting requirements, performance criteria and other terms and conditions. During fiscal 2026 and 2025, 135,072 and 142,328 performance-based RSUs, respectively, were granted to certain employees. For the years ended June 28, 2026, June 29, 2025, and June 30, 2024, the Company had stock compensation expense of $298 thousand, $136 thousand, and $149 thousand, respectively, related to RSUs. As of June 28, 2026, there was $260 thousand, $161 thousand and $38 thousand unamortized stock compensation expense related to RSUs, which should be recognized during fiscal years 2027, 2028 and 2029, respectively.

 

The restricted stock units granted to each recipient are allocated among performance criteria pertaining to various aspects of the Company’s business, as well as its overall operations, measured based on the second fiscal year following the date of grant. Achievement of the various performance criteria entitles the recipient to receive shares of common stock in amounts ranging from 50% to 150% of the number of restricted stock units granted. Grantees of restricted stock units do not have any rights of a stockholder, and do not participate in any distributions on our common stock, until the award fully vests upon satisfaction of the vesting schedule, performance criteria and other conditions set forth in their award agreement. Contingent unvested restricted stock units are considered participating securities under ASC 260, “Earnings Per Share,” and are included in the calculation of diluted earnings per share at the beginning of the most recent quarterly period when the performance targets and vesting are probable to be met.

 

Compensation cost is measured as an amount equal to the fair value of the restricted stock units on the date of grant and is expensed over the vesting period if achievement of the performance criteria is deemed probable, with the amount of the expense recognized based on the best estimate of the ultimate achievement level.

 

A summary of the status of restricted stock units as of June 28, 2026, June 29, 2025, and June 30, 2024, and changes during the fiscal years then ended is presented below: