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, which was amended effective February 9, 2021 (the “2018 Plan”). All future awards will be issued 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 three quarters ended June 29, 2021 and June 30, 2020 includes $327,000 and $223,000, respectively, of compensation costs related to our stock-based compensation arrangements.

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 three quarters ended June 29, 2021. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the employees who receive equity awards.

During the three quarters ended June 29, 2021, the Company granted 90,000 incentive stock options to its Chief Executive Officer, from available shares under its 2018 Plan, with an exercise price of $2.33 per share and a per share weighted average fair value of $1.22. These options were granted pursuant to the Chief Executive Officer’s Second Amended and Restated Employment Agreement dated December 24, 2020. These options became fully vested on April 6, 2021 pursuant to the terms of the employment agreement and related stock option grant agreement.

During the three quarters ended June 30, 2020, there were no incentive stock options granted.

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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:

	Three Quarters Ended June 29, 2021 Incentive and Non-Qualified Stock Options

Expected term (years)		3.63
Expected volatility		74.62	%
Risk-free interest rate		0.24	%
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 three quarters ended June 29, 2021 under all plans:

	Shares			Weighted Average Exercise Price		Weighted Avg. Remaining Contractual Life (Yrs.)

Outstanding at beginning of year		630,268		$	3.56
Options granted		90,000		$	2.33
Options exercised		(170,248	)	$	2.39
Forfeited		(14,309	)	$	3.76
Expired		(20,629	)	$	1.56
Outstanding June 29, 2021		515,082		$	3.81	5.7
Exercisable June 29, 2021		421,862		$	3.73	5.4

As of June 29, 2021, the aggregate intrinsic value of the outstanding and exercisable options was $358,000 and $331,000, respectively. Only options whose exercise price is below the current market price of the underlying stock are included in the intrinsic value calculation.

As of June 29, 2021, the total remaining unrecognized compensation cost related to non-vested stock options was $110,000 and is expected to be recognized over a weighted average period of approximately 1.5 years.

There were 170,248 stock options exercised during the three quarters ended June 29, 2021 with proceeds of approximately $407,000. There were 15,646 stock options exercised that resulted in an issuance of 2,413 shares during the three quarters ended June 30, 2020 with no proceeds in conjunction with the termination of the Company’s CEO pursuant to a severance and separation agreement.

Common Stock and Performance Share Grants

During the three quarters ended June 29, 2021, the Company granted its Directors 12,948 shares of common stock and its Chief Executive Officer 10,000 performance shares from available shares under its 2018 Plan. The shares were issued with a grant date fair market value of $2.78 and $2.77, respectively, which is equal to the closing price of the stock on the date of grants. The performance shares granted to the Chief Executive Officer became fully vested on April 6, 2021 pursuant to the vesting provisions set forth in the grant notice.

No common stock or performance shares were granted during the three quarters ended June 30, 2020.

Restricted Stock Units

No restricted stock units were granted during the three quarters ended June 29, 2021.

During the three quarters ended June 30, 2020 the Company granted a total of 60,336 restricted stock units from available shares under its 2018 Plan. 46,336 shares were issued with a grant date fair market value of $1.54 which is equal to the closing price of the stock on the date of the grant, these restricted stock units vest three years following the grant date. 14,000 shares were issued with a grant date fair market value of $1.67 which is equal to the closing price of the stock on the date of the grant, these restricted stock units vested on their grant date.

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A summary of the status of non-vested restricted stock as of June 29, 2021 is presented below.

	Shares			Grant Date Fair Value Per Share

Non-vested shares at beginning of year		92,604		$1.54 to $3.95
Vested		(26,894	)	$2.52 to $3.95
Forfeited		(1,935	)	$2.30 to $2.68
Non-vested shares at June 29, 2021		63,775		$1.54 to $3.95

As of June 29, 2021, there was $60,000 of total unrecognized compensation cost related to non-vested restricted stock. This cost is expected to be recognized over a weighted average period of approximately 0.4 years.