(9) Share-Based Payments

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. That cost is recognized over the period during which an employee is required to provide services in exchange for the award, the requisite service period (usually the vesting period). The Company provides an estimate of forfeitures at initial grant date. Reductions in compensation expense associated with the forfeited options are estimated at the date of grant, and this estimated forfeiture rate is adjusted periodically based on actual forfeiture experience. The Company uses the Black-Scholes option pricing model to determine the fair value of the stock options granted.

During the quarter ended June 27, 2026, 99,600 stock options were granted to employees under the Company’s 2020 Equity Incentive Plan Stock Incentive Plan (the “Plan”) and 37,500 stock options were granted to outside directors. For the six months ended June 27, 2026 a total of 99,600 stock options and 37,500 stock options were granted to employees and directors, respectively.  During the quarter ended June 28, 2025, no stock options were granted to employees under the  Plan  and no stock options were granted to outside directors.  For the six months ended June 28, 2025 a total of 115,000 stock options and 75,000 stock options were granted to employees and directors, respectively. 

During the three and six months ended June 27, 2026, there were 253,250 and 272,250 options exercised and corresponding shares issued at a weighted average price of $2.37 and $2.28. During the three and six months ended June 28, 2025, there were no options exercised and corresponding shares issued.

During the three and six months ended June 27, 2026, the Company repurchased 72,271 and 72,942 shares for employees to facilitate their exercise of stock options. During the three and six months ended June 28, 2025, the Company did not repurchase any shares for employees to facilitate their exercise of stock options.

There were also 929,900 options outstanding at a weighted average price of $2.80 with a weighted average remaining contractual term of 7.31 years as of June 27, 2026, and there were 476,925 options exercisable at a weighted average price of $2.73 with a weighted average remaining term of 6.67 years. There were 1,083,300 options outstanding at a weighted average price of $2.45 with a weighted average remaining contractual term of 7.6 years as of June 28, 2025 and there were 594,100 shares exercisable at a weighted average price of $2.40 with a weighted average remaining term of 6.49 years. The Plan, as amended, is authorized to issue 1,500,000 shares of common stock. As of June 27, 2026, there were 281,270 shares available for future grants under the 2020 Plan and 49,200 shares outstanding under the 2009 Plan. As of June 28, 2025, there were 421,400 shares available for future grants under the 2020 Plan and 141,900 shares outstanding under the 2009 Plan.

As of June 27, 2026, there was $582 thousand of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan; that cost is expected to be recognized over a weighted average period of  2.30 years.

During the three and six months ended June 27, 2026, the Company recognized $174,845 and $223,094, respectively, as shared-based compensation expense related to previously granted shares under the Plan.

During the three and six months ended June 28, 2025, the Company recognized $49,354 and $171,540, respectively, as shared-based compensation expense related to previously granted shares under the Plan.