On June 20, 2023, the Company adopted the Drilling Tools International Corporation 2023 Omnibus Incentive Plan (the 2023 Plan). The 2023 Plan became effective on the closing of the Merger, which also occurred on . The 2023 Plan provides for the issuance of shares of Common Stock up to ten percent (10%) of the shares of outstanding Common Stock as of the closing of the Merger (which equated to 2,976,854 shares as of December 31, 2023) and automatically increases on the first trading day of each calendar year by the number of shares of Common Stock equal to three percent (3%) of the total number of outstanding Common Stock on the last day of the prior calendar year. The 2023 Plan allows for awards to be issued to employees, non-employee directors, and consultants in the form of options, stock appreciation rights, restricted shares, restricted stock units, performance based awards, other share-based awards, other cash-based awards, or a combination of the foregoing. As of March 31, 2025, there were 1,188,356 shares of Common Stock available for issuance under the 2023 Plan.

The fair value of each stock option award is estimated on the date of grant using a Black-Scholes option valuation model. Expected volatilities are based on comparable public company data. The Company uses future estimated employee termination and forfeiture rates of the options within the valuation model. The expected term of options granted is derived using the “plain vanilla” method due to the lack of history and volume of option activity at the Company. The risk-free rate is based on the approximate U.S. Treasury yield rate in effect at the time of grant. The Company’s calculation of share price involves the use of different valuation techniques, including a combination of an income and market approach. The Company used the quoted market price as of the grant date as an input into the Black-Scholes model.


	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
OUTSTANDING, December 31, 2024		4,963,626	$	3.50		6.46	$	—
Granted		—		—		—		—
Exercised		—		—		—		—
Forfeited		—	$	—		—		—
OUTSTANDING, March 31, 2025		4,963,626	$	3.50		5.72	$	—
UNVESTED, March 31, 2025		1,656,666	$	3.02		8.88	$	—
EXERCISABLE, March 31, 2025		3,306,960	$	2.93		4.14	$	—

During the three months ended March 31, 2025 and 2024, there was $0.4 million and $0.2 million of stock based compensation related to Stock Options within selling, general, and administrative expenses on the consolidated statements of income and comprehensive income, respectively. As of March 31, 2025 and March 31, 2024, there was $2.7 million and $4.4 million, respectively, of unrecognized compensation expense.

In May 2024, the Company issued an aggregate 143,000 restricted stock units (“RSUs”) to five members of the Board (the “Directors”). Of the awards, 74,440 RSUs were deemed to be related to services performed during the year ended December 31, 2023, and were to vest immediately, while the remaining 68,560 RSUs are subject to a vesting term of one year. The Directors are considered to be employees of the Company under ASC 718. Additionally, on February 28, 2025, the Company issued 909,321 RSU's to employees of the Company. These RSUs will vest equally over 4 years and have a grant date price of $3.23.

During three months ended March 31, 2025, the Company recognized $0.2 million of stock based compensation related to RSUs within selling, general, and administrative expenses on the consolidated statements of income and comprehensive income. As of March 31, 2025, unrecognized compensation expense related to the RSUs totaled $2.9 million

NOTE 10 – STOCK-BASED COMPENSATION