Note 8. Share-Based Compensation

The Company’s share-based compensation plans are described in Note 8 to the financial statements included in the Company’s Annual Report on Form 10-K for fiscal 2025. Share-based compensation expenses were $1,960,000 and $2,409,000 for the nine months ended March 31, 2026, and 2025, respectively. This expense is included in selling, general and administrative, research and development, and cost of revenues in the Condensed Statements of Operations.

Stock Options

Stock option transactions during the nine months ended March 31, 2026, are summarized as follows:

The following assumptions were used to estimate the fair value of stock options granted:

The intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price. On March 31, 2026, the weighted-average remaining contractual term for all outstanding stock options was 5.7 years, and the aggregate intrinsic value of the options was $7,906,000. Outstanding on March 31, 2026, there were 632,151 stock options issued to employees, of which 446,848 were vested and exercisable and had an aggregate intrinsic value of $6,518,000. As of March 31, 2026, $677,000 of total unrecognized compensation expense related to stock options is expected to be recognized over a weighted-average period of approximately 2.1 years.

Restricted Stock

During the nine months ended March 31, 2026, the Company issued restricted stock awards to employees totaling 22,300 shares of common stock, with a weighted average vesting term of 3 years and a weighted average fair value of $23.95 per share. During the nine months ended March 31, 2026, the Company issued restricted stock awards to its Board of Directors totaling 21,000 shares of common stock, with a vesting term of six months and a fair value of $27.42 per share. There were 65,374 shares of unvested restricted stock with a weighted average fair value of $22.02 per share outstanding as of March 31, 2026. As of March 31, 2026, $636,000 of total unrecognized compensation expense related to restricted stock awards is expected to be recognized over a weighted-average period of approximately 1.6 years.

During the nine months ended March 31, 2026, the Company issued restricted stock units to employees totaling 58,548 shares of common stock underlying restricted stock units, with a weighted average vesting term of 3 years and a weighted average fair value of $24.01 per share. During the nine months ended March 31, 2026, there were 8,073 restricted stock units canceled or forfeited. There were 94,891 shares of unvested restricted stock units with a weighted average fair value of $21.30 per share outstanding as of March 31, 2026. As of March 31, 2026, $1,109,000 of total unrecognized compensation expense related to restricted stock units is expected to be recognized over a weighted-average period of approximately 2.3 years.

Performance-Based Restricted Stock Units

The Company granted 175,000 performance-based restricted stock units (“PSUs”) to our President and Chief Executive Officer in connection with his commencement of service on July 1, 2023. The PSUs were eligible to vest and settle into shares of common stock based on the extent to which performance goals tied to Total Shareholder Return (“TSR”) of our common stock were achieved. TSR was evaluated from the initial grant date through the end of each subsequent fiscal quarter using the three-month volume-weighted average closing prices in accordance with the underlying award agreement. The PSUs were eligible to vest and settle into shares of common stock on a 1-for-1 basis with respect to one-half of the shares upon achieving a TSR of 50% and the remaining shares upon a TSR of 100%, in each case within four years of the date of grant. The grant date fair value of the awards was determined using a Monte Carlo valuation model with an expected term of four years. As of September 30, 2024, TSR exceeded the 50% target, resulting in a partial vesting and the issuance of an initial 87,500 shares of common stock to our CEO. As of December 31, 2024, TSR exceeded the 100% target, resulting in the vesting of the remaining 87,500 shares of common stock. As a result of both vesting, unrecognized stock-based compensation expense totaling $648,000 was recognized in the nine months ended March 31, 2025, which was set to be recognized in future periods. 

There were no performance-based restricted stock units issued or outstanding during the nine months ended  March 31, 2026.