12. EMPLOYEE STOCK PLANS

2023 Equity Incentive Plan

On October 23, 2023, the shareholders of the Company approved the 2023 Equity Incentive Plan (the "2023 Plan") to replace the Company’s 2016 Equity Incentive Plan (the “2016 Plan”) and reserved a total of 1,500,000 shares of common stock under the 2023 Plan.

The 2023 Plan permits grants to employees of share-based awards, including stock options, RSUs, PRSUs, restricted shares, performance restricted shares. Full value awards, which are equity awards other than options, stock appreciation rights or other awards that are based solely on an increase in value of the shares following the grant date, when granted or forfeited will be counted as the same number of common stock shares added or deducted to the remaining available shares for issuance under the 2023 Plan. 

On October 20, 2025, the Company’s shareholders approved amendments to the 2023 Equity Incentive Plan to increase the share reserves by 2,500,000 shares. The additional shares became available for future issuance upon shareholder approval.

2016 Equity Incentive Plan

In October 2016, the Company’s 2016 Plan was approved by the Company’s shareholders. The 2016 Plan replaced the 2006 Equity Incentive Plan and would continue in effect until 2026. The exercise price of each stock option equals the market value of the Company's common stock on the date of grant. Options typically vest over four years, subject to the grantee’s continued service with the Company through the scheduled vesting date, and expire in seven years from the grant date. A total of 4,848,000 shares of common stock have been reserved for issuance under the Company’s 2016 Plan. Full value awards, which are equity awards other than options, stock appreciation rights or other awards that are based solely on an increase in value of the shares following the grant date, when granted or forfeited will be counted as two times the number of shares added or deducted to the remaining available shares for issuance under the 2016 Plan.

The following table summarizes the total stock-based compensation expense for the fiscal years ended May 29, 2026, May 30, 2025 and May 31, 2024:

As of May 29, 2026 and May 30, 2025, stock-based compensation totaling $0.4 million and $0.3 million and, respectively, was capitalized as part of inventory.

The following table presents the combined stock activities and the total number of shares available for grant under the Company’s equity incentive plans:

Restricted Stock Units, Performance Restricted Stock Units and Restricted Stock Awards

The Company’s nonvested RSU, PRSU and restricted stock awards granted to employees and members of the Company’s Board of Directors for the fiscal year ended May 29, 2026 were as follows:

During fiscal 2026, 2025, and 2024, the Company recorded stock-based compensation related to RSUs, PRSUs, performance restricted shares and restricted shares of $5.5 million, $3.7 million and $1.3 million.

As of May 29, 2026, the total unrecognized compensation expense related to unvested RSU, PRSU and restricted shares was $8.9 million. This expense will be amortized on a straight-line basis over a weighted average period of approximately 2.1 years.

Stock Options

The following table summarized the stock option transactions during fiscal 2026:

The fair value of the Company’s stock options granted to employees was estimated on the date of grant using the Black-Scholes model and the straight-line attribution approach with the following weighted average assumptions:

No stock options were granted during fiscal year 2025. The stock option granted during fiscal year 2026 was immaterial. The total intrinsic values of options exercised were $11.3 million, $0.6 million, and $9.5 million during fiscal 2026, 2025, and 2024, respectively.

During fiscal year 2026, 2025, and 2024, the Company recorded stock-based compensation related to its stock options of $0.3 million, $0.5 million, and $0.4 million, respectively.

As of May 29, 2026, the total unrecognized compensation expense related to unvested stock options granted and outstanding is immaterial.

Stock Appreciation Rights (Cash-Settled Awards)

The Company grants cash-settled Stock Appreciation Rights (“SARs”) to certain employees. These awards generally vest over a one-year period of continuous service and have a contractual term of one year. Participants must be full-time employees at the time of payment and are entitled to receive a cash payment equal to the excess, if any, of the Company's common stock closing market price at the reporting date over the stock price on the grant date. No cash payment is made if the stock price at the reporting date is lower than the grant-date stock price. Because the awards are settled in cash, they are accounted for as liability-classified awards. The related liability and compensation expense are recognized over the one-year vesting period. The liability is remeasured at fair value at the end of each reporting period until the awards vest, with changes in fair value recognized as adjustments to compensation expense.

The following table summarized the SARs transactions during fiscal 2026:

During fiscal year 2026, 2025, and 2024, the Company recorded compensation related to its SARs of $0.6 million, nil, and nil, respectively.

As of May 29, 2026, the total liability recognized for cash-settled SARs was $0.6 million (nil as of May 30, 2025), all of which is included within Accrued expenses and other current liabilities. As of May 29, 2026, there were no nonvested SARs and unrecognized compensation expense was nil.

Employee Stock Purchase Plan

The ESPP permits employees to purchase common stock at a discount through payroll withholdings at certain specified dates (purchase period) within a defined offering period. The purchase price is 85.0% of the fair market value of the common stock at the end of the purchase period and is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code.

On October 20, 2025, the Company’s shareholders approved amendments to the Amended and Restated 2006 Employee Stock Purchase Plan to increase the share reserves by 300,000 shares. The additional shares became available for future issuance upon shareholder approval.

For the fiscal years ended May 29, 2026, May 30, 2025, and May 31, 2024, approximately 146,000, 116,000, and 72,000 shares of common stock were issued under the ESPP. As of May 29, 2026, 363,000 shares remain available for issuance under the ESPP.

The fair value of each purchase right under the ESPP was estimated on the date of grant using the Black-Scholes model with the following weighted average assumptions:

During fiscal years 2026, 2025, and 2024, the Company recorded stock-based compensation related to its ESPP of $1.0 million, $1.0 million, and $0.8 million, respectively.

As of May 29, 2026, the total unrecognized compensation expense related to purchase rights under the ESPP was $0.7 million. This expense will be amortized on a straight-line basis over a weighted average period of approximately 0.7 years.

Employee Stock Ownership Plan 

The Company had a non-contributory, trusteed employee stock ownership plan or Employee Stock Ownership Plan (“ESOP”) for full-time and part-time employees. The Company can contribute either shares of the Company’s stock or cash to the ESOP. During the fiscal years ended May 30, 2025 and May 31, 2024, the Company contributed 26,064, and 9,085 shares to the ESOP. As a result, the Company recognized stock-based compensation expense totaling zero and $0.3 million during the fiscal years ended May 30, 2025 and May 31, 2024, respectively. The Company terminated its ESOP plan in fiscal year 2025 and began to provide a matching contribution to the participants of the 401(k) Plan.