As of March 31, 2025, 1,185,727 stock options were outstanding and 1,775,459 shares were available for issuance under the Company’s Restated Omnibus Incentive Plan (formerly the Restated 1988 Executive Stock Option Plan) (the “Omnibus Plan”). Under the Omnibus Plan, the Company granted shares of common stock to key employees, non-employee directors, and consultants at exercise prices equal to or greater than the fair market value of the common stock on the grant date. Options granted under the Omnibus Plan generally vested as to 25% of the underlying shares one year after the grant date, with the remaining 75% vesting ratably each month over the following 36 months. Options granted to employees expire five years from the grant date, and options granted to directors expire ten years from the date of grant. All options granted in fiscal year 2026 and 2025 had an exercise price equal to the fair value of the Company’s common stock on the grant date and are non-statutory stock options. After August 7, 2025, the Company will not grant any further equity awards under the Omnibus Plan. Outstanding awards under the Omnibus Plan will remain outstanding, unchanged and subject to the terms of the Omnibus Plan and their respective award agreements.

On August 7, 2025, the Company’s stockholders approved the 2025 Stock Incentive Plan (the “2025 SIP”) replacing the Omnibus Plan, which expires on June 30, 2026. Consistent with the Omnibus Plan, the primary purpose of the 2025 SIP is to attract and retain qualified personnel. The 2025 SIP has 1,775,459 shares of common stock reserved for issuance to employees, directors, consultants, independent contractors and advisors. The 2025 SIP permits the issuance of stock options, restricted stock, stock appreciation rights, restricted stock units and performance awards.

Shares subject to awards that are forfeited, expire or are otherwise terminated without shares being issued, or shares withheld to pay the exercise price of an award or to satisfy tax withholding obligations, including shares subject to awards granted under the Omnibus Plan that are outstanding after June 30, 2026, will be returned to the pool of shares available for grant and issuance under the 2025 SIP. As of March 31, 2026, 1,447,857 shares of common stock remained available for future issuance under the 2025 SIP, subject to adjustment for future stock splits, stock dividends, and similar changes in capitalization.

The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model based on the assumptions included in the table below. The risk-free rate is based on the interest rate paid on a U.S. Treasury issue with a term similar to the estimated life of the option. The Company uses historical data, among other factors, to estimate the expected volatility, dividend yield and option life. The Company accounts for forfeitures as they occur, rather than estimating expected forfeitures.

The fair value of each grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following weighted average assumptions were used for the fiscal years ended March 31, 2026, 2025 and 2024:


	Fiscal 2026			Fiscal 2025			Fiscal 2024
Expected volatility		34	%		32	%		34	%
Risk free interest rate	3.67% to 4.23%			3.89% to 4.59%			3.91% to 4.65%
Dividend yield		0.0	%		0.0	%		0.0	%
Weighted average option life	3.9 to 4.0 years			3.9 to 4.0 years			4.0 to 4.1 years

For the fiscal years ended March 31, 2026, 2025 and 2024, the Company recorded share-based compensation expense of $5,411,000, $5,714,000, and $4,982,000, respectively. The table below shows the amounts recognized in the financial statements for the fiscal years ended March 31, 2026, 2025 and 2024.


	Fiscal 2026			Fiscal 2025			Fiscal 2024
Cost of revenue	$	2,641,000		$	2,794,000		$	2,797,000
General and administrative		2,770,000			2,920,000			2,185,000
Total cost of stock-based compensation included in income before income taxes		5,411,000			5,714,000			4,982,000
Amount of income tax benefit recognized		(1,241,000	)		(1,256,000	)		(987,000	)
Amount charged to net income	$	4,170,000		$	4,458,000		$	3,995,000
Effect on basic earnings per share	$	0.08		$	0.09		$	0.08
Effect on diluted earnings per share	$	0.08		$	0.09		$	0.08

The following table summarizes the status of stock options outstanding and exercisable at March 31, 2026:


Range of Exercise Prices	Number of Outstanding Options		Weighted Average Remaining Contractual Life		Outstanding Options – Weighted Average Exercise Price		Exercisable Options – Number of Exercisable Options		Exercisable Options – Weighted Average Exercise Price
$14.44 to $51.01		303,116		2.09	$	35.75		298,373	$	35.53
$51.02 to $53.08		329,370		3.68		52.73		104,890		52.10
$53.09 to $74.09		325,404		2.43		64.56		231,802		63.99
$74.10 to $110.18		238,393		4.53		93.78		37,895		99.48
Total		1,196,283		3.11	$	59.83		672,960	$	51.52

The following table summarizes the status of all outstanding options at March 31, 2026, and changes during the fiscal year then ended:


	Number of Options			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value as of March 31, 2026
Options outstanding, March 31, 2025		1,185,727		$	51.07
Granted		348,600			66.51
Exercised		(317,046	)		33.32
Cancelled – forfeited		(19,364	)		76.39
Cancelled – expired		(1,634	)		79.43
Options outstanding, March 31, 2026		1,196,283		$	59.83		3.11	$	6,369,271
Options vested and expected to vest		1,164,506		$	59.25		3.09	$	6,369,271
Ending exercisable		672,960		$	51.52		2.13	$	5,978,576

The weighted average fair value of options granted during fiscal 2026, 2025 and 2024 was $20.89, $33.64, and $25.16, respectively. The total intrinsic value of options exercised during fiscal years 2026, 2025 and 2024 was $15,963,000, $24,182,000, and $29,230,000 respectively.

Included in the above-noted stock option grants and stock compensation expense are performance-based stock options which vest only upon the Company’s achievement of certain earnings per share targets on a calendar year basis, as determined by the Company’s Board of Directors. These options were valued in the same manner as the time-based options. However, the Company only recognizes stock compensation expense to the extent that the targets are determined to be probable of being achieved, which triggers the vesting of the performance options. During the fiscal years ended March 31, 2026, 2025 and 2024, the Company recognized stock compensation expense for performance-based options in the amount of $1,564,000, $1,715,000, and $1,199,000, respectively.

The Company received $7,562,000, $10,317,000, and $9,266,000 of cash receipts from the exercise of stock options during fiscal 2026, 2025 and 2024, respectively. As of March 31, 2026, $9,009,000 of total unrecognized compensation costs related to stock options is expected to be recognized over a weighted average period of 3 years.