11. Employee Benefit Plans

Profit Sharing Plan:

The Company provides its U.S.-based employees with a profit-sharing plan and trust under § 401(k) of the Internal Revenue Code. This plan allows all eligible employees to defer a portion of their income through voluntary contributions to the plan. In accordance with the provisions of the plan, the Company can make discretionary matching contributions in the form of cash or common stock. For the fiscal years ended April 30, 2025 and 2024, the Company contributed 70,100 and 58,987 shares of common stock, respectively. The approximate value of these shares at the date of contribution was $901,000 and $514,000 in fiscal years 2025 and 2024, respectively. Contributed shares are drawn from the Company’s common stock and during fiscal years 2025 and 2024, such transactions increased additional paid in capital by $831,000 and $455,000, respectively. As of April 30, 2025, the plan held a total of 504,734 shares, which were allocated to the accounts of the individual participants. As of April 30, 2024, the plan held a total of 495,395 shares, which were allocated to the accounts of the individual participants.

Income Incentive Pool:

The Company maintains incentive bonus programs for certain employees that are based on operating profits of the individual subsidiaries to which the employees are assigned. The Company also adopted a plan for the President and Chief Executive Officer of the Company for which the formula is based on consolidated pre-tax profits, bookings, and revenue. The incentive bonus recorded for the fiscal year ended April 30, 2025 was $1.8 million. The incentive bonus recorded for the fiscal year ended April 30, 2024 was $489,000.

Employee Stock Plans:

On October 11, 2024 the Company adopted the 2025 Stock Award Plan (“2025 Plan”), which replaced the 2005 Stock Award Plan. The 2025 Plan incorporates all previous grants under the previous plan, without changes to the original terms of the grants, and, additionally, adds an additional 700,000 shares for future grants which was approved by stockholder vote at the Company’s annual meeting. The 2025 Plan is for key management employees, including officers and directors who are employees, certain consultants and independent members of the Board of Directors. Under the 2025 Plan equity compensation, such as nonqualified stock options, incentive stock options, stock appreciation rights (“SAR”), performance stock units (“PSU”) and restricted stock units (“RSU”), are granted at the discretion of the Compensation Committee of the Board of Directors at an exercise price not less than the fair market value of the Company’s common stock on the date of grant.

Typically, options and SARs vest over a four-year period from the date of grant. The options and SARs generally expire five or ten years after the date of grant (the most recent SARs awards, beginning in fiscal year 2017, expire in five years), at the Compensation Committee’s discretion, and are subject to certain restrictions on transferability of the shares obtained on exercise. Under the 2025 Plan, instruments granted which expire, are canceled, or are tendered in the exercise of such instruments, increased the shares available for future grants under the 2025 Plan.

As of April 30, 2025, eligible employees and directors had been granted total SARs representing approximately 2,385,000 shares of the Company’s common stock, of which no shares were outstanding and no shares were exercisable. There were no SARs granted during the fiscal year 2025. When the SARs become exercisable, the Company will settle the SARs by issuing to exercising recipients the number of shares of stock from common stock or treasury stock, if available, equal to the appreciated value of the Company’s stock between the grant date and exercise date. At the time of exercise, the quantity of shares under the SARs grant equal to the exercise value divided by the then market value of the shares will be returned to the pool of available shares for future grant under the Plan. During the fiscal year ended April 30, 2025, employees exercised 20,000 SARs and were granted 4,556 shares of the Company’s common stock. There were 15,444 shares returned to the pool of available shares. Forfeitures are recorded as they occur.

The excess of the consideration received over the par value of the common stock or cost of treasury stock issued under both types of option plans is recognized as an increase in additional paid-in capital.

The following table summarizes information about stock option and SARs activity for the years ended April 30, 2025 and 2024:

As of April 30, 2025 and 2024, respectively, there were no unrecognized compensation cost related to non-vested options and SARs under the plans.

During the fiscal year ended April 30, 2025 and 2024, there were no shares that vested.

There were no stock-based compensation costs, for options and SARs, included in the cost of revenues of programs on which the Company recognizes revenue under the POC method for the fiscal years ended April 30, 2025 and 2024. There was no stock-based compensation expense included in selling and administrative expenses related to options and SARs during the fiscal years ended April 30, 2025 and 2024, respectively.

The Company classifies cash flows resulting from the tax benefits from tax deductions recognized upon the exercise of stock options or SARs (tax benefits) as operating cash flows. The Company did not recognize any tax benefits from the exercise of stock options and SARs for the fiscal years presented.

Restricted Stock Plan and Other Issuances:

The Company began issuing RSUs to eligible employees in fiscal year 2020. The fair value of these awards is equivalent to the market value of the Company’s common stock on the grant date and vests over a period of time. RSUs are not shares of the Company’s common stock and do not have any rights or privileges thereof, including voting or dividend rights. On the applicable vesting date, the holder of an RSU becomes entitled to share of the Company’s common stock. A portion of the RSUs awarded will vest annually until fiscal year 2029, the remaining represent awards that cliff vest in fiscal year 2029.

 During the fiscal year ended April 30, 2025 and 2024, the Company issued 1,550 shares of common stock and 3,300 shares of common stock, respectively, to select employees for milestone years of service to the Company. These shares were issued under the 2025 Stock Award Plan, are shares of the Company’s common stock, and are fully vested at time of issuance.

In fiscal year 2021 the Company elected to issue PSUs. The fair value of these awards is equivalent to the market value of the Company’s common stock on the grant date and requires an assessment of the probability that the specified performance criteria will be achieved, which is updated at each reporting date. PSUs are not shares of the Company’s common stock and do not have any rights or privileges thereof, including voting or dividend rights. On the applicable vesting date, subject to the attainment of the specified performance criteria, the holder of a PSU becomes entitled to a share of the Company’s common stock. PSUs are subject to certain restrictions and forfeiture provisions, in addition to performance vesting conditions, prior to vesting, and are evaluated as of each reporting date to determine if performance criteria will be met. The PSUs awarded will vest, subject to specified performance criteria, annually until fiscal year 2029.

Stock-based compensation costs, related to RSUs and PSUs, included in the cost of revenues of programs on which the Company recognizes revenue under the POC method were approximately $357,000 and $487,000 for the fiscal years ended April 30, 2025 and 2024, respectively. Stock-based compensation expense, for RSUs and PSUs, included in selling and administrative expenses was approximately $776,000 and $301,000 for the fiscal years ended April 30, 2025 and 2024, respectively. Unrecognized stock compensation was $4.2 million and $2.9 million for the fiscal years ended April 30, 2025 and 2024, respectively. The grant date fair value of vested RSUs and PSUs was approximately $918,000 and $521,000 for the fiscal years ended April 30, 2025 and 2024, respectively.

The following table summarizes activity for the RSUs and PSUs awards that reduce available capacity under the 2005 Stock Award Plan for the fiscal years ended April 30, 2025 and 2024:

As of April 30, 2025, performance conditions related to the majority of outstanding PSUs are anticipated to be achieved. The PSUs will continue to vest, the same as RSUs, annually over a four year period.

Deferred Compensation Agreements:

The Company has a series of agreements with key employees providing for the payment of benefits upon retirement or death. Annual amounts relating to these plans are recorded based on actuarial projections, which include various actuarial assumptions, including discount rates, mortality rates, assumed rates of return compensation increases, and turnover rates. The actuarial assumptions used to determine deferred compensation liabilities and expense are reviewed annually and modified based on current economic conditions and trends. The discount rate used to measure obligations is based on a corporate bond rate yield curve that matches projected future benefit payments.

Under these agreements, each key employee receives specified retirement payments for the remainder of the employee’s life with a minimum payment of ten years’ benefits to either the employee or his or her beneficiaries. The agreements also provide for lump sum payments upon termination of employment without cause and reduced benefits upon early retirement. The Company pays the benefits out of its working capital but has also purchased whole life or term life insurance policies on the lives of certain of the participants to cover the optional lump sum obligations of the agreements upon the death of the participant. Deferred compensation expense charged to selling and administrative expenses during the fiscal year ended April 30, 2025 was approximately $504,000. Deferred compensation expense charged to selling and administrative expenses during the fiscal year ended April 30, 2024 was approximately $219,000.

Life Insurance Policies and Assets Held in Trust:

The whole-life insurance policies on the lives of certain participants covered by deferred compensation agreements have been placed in a Trust. Upon the death of any insured participant, cash received from life insurance policies in excess of the Company’s deferred compensation obligations to the estate or beneficiaries of the deceased, are also placed in the Trust. These assets belong to the Company until a change of control event, as defined in the Trust agreement, should occur. At that time, the Company is required to add sufficient cash to the Trust so as to match the deferred compensation liability described above. Such funds will be used to continue the deferred compensation arrangements following a change of control. The Life Insurance Policies amounted to $7.0 million and $6.6 million at April 30, 2025 and 2024, respectively. The business account and U.S. securities within the Trust are valued on a Level 1 basis and amounted to $3.5 million and $2.8 million at April 30, 2025 and 2024, respectively. The fixed income corporate debt securities within the Trust are valued on a Level 2 basis and amounted to $0.4 million and $0.9 million at April 30, 2025 and 2024, respectively. Level 2 securities are valued at the closing prices and are consistent with quoted prices of similar assets reported in active markets.