| 2011 EQUITY INCENTIVE PLAN | Note 10- 2011 EQUITY INCENTIVE PLAN: On August 31, 2011, the Company’s shareholders approved
the adoption of the Company’s 2011 Equity Incentive Plan (“2011 Plan”) to provide for the grant of stock options
and restricted stock awards to purchase up to 750,000 shares of the Company’s common stock to all employees, consultants
and other eligible participants including senior management and members of the Board of Directors of the Company. The 2011 Plan
replaced the prior 2002 Employee Stock Option Plan which had expired in accordance with its terms. Options granted to employees under the 2011 Plan may be
designated as options which qualify for incentive stock option treatment under Section 422A of the Internal Revenue Code, or options
which do not qualify (non-qualified stock options). Under the 2011 Plan, the exercise price of an option designated
as an incentive stock option shall not be less than the fair market value of the Company’s common stock on the day the option
is granted. In the event an option designated as an incentive stock option is granted to a ten percent (10%) or greater shareholder,
such exercise price shall be at least 110 percent (110%) of the fair market value of the Company’s common stock and the
option must not be exercisable after the expiration of five years from the day of the grant. The 2011 Plan also provides that
holders of options that wish to pay for the exercise price of their options with shares of the Company’s common stock must
have beneficially owned such stock for at least six months prior to the exercise date. Exercise prices of non-incentive stock options may be less
than the fair market value of the Company’s common stock. The aggregate fair market value of shares subject to options
granted to a participant(s) that are designated as incentive stock options, and which become exercisable in any calendar year,
shall not exceed $100,000. On July 1, 2015, our Board of Directors granted
245,000 options to purchase shares of the Company’s common stock under the 2011 Plan as follows: (i) Michael Offerman,
our then Chief Executive Officer, was granted 75,000 options; (ii) Robert Knoth, our Chief Financial Officer, was granted
50,000 options; (iii) four non-executive officer key employees were granted 110,000 options; and (iv) each of our
non-management directors, Allen Gottlieb and Gerald Chafetz, was granted 5,000 options. The stock options: (i) have a
ten-year term; (ii) have an exercise price equal to the value of the Company’s common stock on the date of grant; and
(iii) were all immediately vested. The options granted to Michael Offerman had an exercise price equal to 110% of such
fair market value because he owned ten percent (10%) or greater of the Company’s outstanding common stock. In the event of the termination of each recipient’s employment by, or association with,
the Company (as applicable), the options will remain exercisable in accordance with the terms of the 2011 Plan. Effective July 15, 2016, the Board of Directors of the Company
unanimously voted to increase the number of directors from three to six directors and elected David Offerman as a Class II director
and Dr. Sonia Marciano and Eric C. Hugel as Class I Directors. Effective August 15, 2016, the Board of Directors also approved
the granting of stock options to purchase shares of the Company’s common stock under the 2011 Plan to each of Dr. Marciano
and Mr. Hugel as follows: Each of the new non-management directors will receive a grant of options totalling 5,000 shares each
subject to the following vesting schedule: (i) 1,000 shares vested immediately (August 15, 2016); (ii) 2,000 shares vested on August
15, 2017; and (iii) 2,000 shares will vest on August 15, 2018. The stock options: (i) have a ten-year term; and (ii) have an exercise
price equal to the value of the Company’s common stock on the date of grant. In the event of the termination of each recipient’s association with the Company, the
options will remain exercisable in accordance with the terms of the 2011 Plan. On September 7, 2018, the Board of Directors elected Michael
E. Rosenfeld to the Board of Directors to fill the vacancy of a Class I Director of the Company created by the death of the Company’s
then President and Chief Executive Officer, Michael Offerman. Such appointment will become effective on October 26, 2018. At the same time, the Board of Directors also approved the
granting of stock options to purchase shares of the Company’s common stock under the 2011 Plan to Mr. Rosenfeld as
follows: He will receive a grant of options totalling 5,000 shares each subject to the following vesting schedule: (i) 1,000
shares will vest on October 26, 2018; (ii) 2,000 shares will vest on October 26, 2019; and (iii) 2,000 shares will vest on
October 26, 2020. The stock options: (i) have a ten-year term; and (ii) have an exercise price equal to the value of the
Company’s common stock on the date of grant. In the event of the termination of each recipient’s association with
the Company, the options will remain exercisable in accordance with the terms of the 2011 Plan. The table below summarizes the option awards for the named
executive officers and non-management directors:
Name Stock Option Grants
David Offerman 50,000
Robert Knoth 50,000
Allen Gottlieb 5,000
Gerald Chafetz 5,000
Sonia Marciano 5,000
Eric Hugel 5,000
Michael E. Rosenfeld 5,000 * *Options for 1,000 shares vested on October 26, 2018,
Options for 1,000 shares have not yet vested. 2,000 shares shall vest on October 26, 2019 and 2,000 shares shall vest on October
26, 2020. The following table shows the option activity for the
fiscal year ended March 30, 2018 and the current six months ended September 28, 2018. Stock-based compensation expense, shown in the table below,
is recorded in general and administrative expenses included in our statement of operations:
Six months Six months Quarter ended Quarter ended
Ref Sep 28, 2018 Sep 29,2017 Sep 28, 2018 (in thousands)
IEH employees $ — $ — $ — $ —
Non-employee directors 6 22 3 3
Total stock compensation expense (a) $ 6 $ 22 $ 3 $ 3
(a): The Company reported compensation expense of $2,798 during the quarter ended September 28, 2018 and $2,798 during the quarter
ended September 29, 2017 resulting from stock options granted on August 15, 2016. Unrecognized stock-based compensation expense
Quarter ended
Quarter ended September 29, 2017
Ref September 28, 2018 (in thousands)
Unrecognized expense for IEH employees $ — $ —
Unrecognized expense for Non-employee directors 8 19
Total unrecognized expense (b) $ 8 $ 19
(b): Unrecognized stock-based compensation expense related to prior years’ equity grants of
stock options to non-employee directors, that had not vested as of the end of the applicable fiscal year. Note
March 30, 2018 March 31, 2017
Risk free interest rate 2.09% 1.88%
Contractual term 10 years 10 years
Dividend yield — —
Expected lives 10 years 10 years
Expected volatility 64% 56%
Fair value per option $ 5.85 $ 6.00 The following table shows the activity for the fiscal
years ended March 30, 2018 and March 31, 2017.
Weighted Avg. Remaining Aggregate
Exercise Contractual Intrinsic Value
Shares Price Term (Years) (in thousands)
Outstanding at the Beginning of the Year 3/25/2016 245,000 $ 6.18 9.27 $ —
Granted 8/15/2016 10,000 $ 5.30 10.00 —
Exercised 0
Forfeited or Expired 0
Outstanding at the End of the Year 3/31/2017 255,000 $ 6.15 8.82 $ 87
Fully Vested 247,000 $ 6.05
Exercisable at the End of the Year
March 31 2017 247,000
Outstanding at the Beginning of the Year 3/31/2017 255,000 $ 6.15 8.82 $ 87
Granted 0
Exercised 0
Forfeited or Expired 0
Outstanding at the End of the Year 3/30/2018 255,000 $ 6.15 8.07 $ 702
Fully Vested 251,000 $ 6.02
Exercisable at the End of the Year 251,000
Outstanding at the Beginning of the Year 3/30/2018 255,000 $ 6.15 8.07 $ 702
Granted 0
Exercised (75,000 )
Forfeited or Expired 0
Outstanding at the End of the Quarter 6/29/2018 180,000 $ 6.04 7.57 $ 666
Fully Vested 176,000 $ 5.94
Exercisable at the End of the Year 176,000
Outstanding at the Beginning of the Quarter 6/29/2018 180,000 $ 6.04 7.57 $ 666
Granted 0
Exercised 0
Forfeited or Expired 0
Outstanding at the End of the Quarter 9/28/2018 180,000 $ 6.04 7.32 $ 1,393
Fully Vested 180,000 $ 5.94
Exercisable at the End of the Quarter 180,000 The aggregate intrinsic value in the table above represents
the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day
of the period and the exercise price, times the number of shares) that would have been received by the option holders had all option
holders exercised their in-the-money options on those dates. This amount will change based on the fair market value of the Company’s
common stock. |
