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2011 EQUITY INCENTIVE PLAN:
12 Months Ended
Mar. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
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 ten 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), which 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, including, without limitation, as follows: (i) Michael Offerman, our former 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 an aggregate of 110,000 options including David Offerman (then Vice-President of Sales and Marketing) who was granted 50,000 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 fair market value of the Company’s common stock as determined under the 2011 Plan, as reported in the OTCBB, on the date of grant ($6.00), except that the options granted to Michael Offerman has an exercise price equal to 110% of such fair market value because he owns ten percent (10%) or greater of the Company’s outstanding common stock; and (iii) were all immediately vested. 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 totaling 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 fair market value of the Company’s common stock as determined under the 2011 Plan, as reported in the OTCBB, on the date of grant ($5.30). 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*

 

 

*Options for 3,000 shares vested, options for 2,000 shares not yet vested.

 

Stock-based compensation expense, shown in the table below, is recorded in general and administrative expenses included in our statement of operations:

 

      Year ended  Year ended
      March 30, 2018  March 31, 2017
   Ref  (in thousands)  (in thousands)
IEH employees     $ $
Non-employee directors        28     
Total stock option expense        (a)   $28   $ 
                
(a):The Company reported additional compensation expense of $27,980 during the year ended March 30, 2018 resulting from stock options granted during the year ended March 31, 2017.

 

Unrecognized stock-based compensation expense

 

      Year ended  Year ended
      March 30, 2018  March 31, 2017
   Ref  (in thousands)  (in thousands)
Unrecognized expense for IEH employees     $    $
Unrecognized expense for Non-employee directors        14    42 
Total unrecognized expense      (b)   $14   $42 

 

(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: Stock option grants to IEH officers, directors and key employees in the fiscal years ended March 30, 2018 and March 31, 2017 were valued using a Black-Scholes model, under the following criteria:

 

   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    $ 38
            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    $ 125
            Granted        0               
            Exercised        0               
            Forfeited or Expired        0               
Outstanding at the End of the Year   3/30/2018    255,000   $6.15    8.07    $ 3,852
            Fully Vested        251,000   $6.02          
            Exercisable at the End of the Year        251,000               

 

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.

 

The Company intends to provide additional information regarding the compensation awarded to the named executive officers and non-management directors in respect of and during the fiscal year ended March 30, 2018, in the proxy statement for the Company’s 2018 annual meeting of shareholders.