15. STOCK – BASED COMPENSATION

Restricted Stock

The Company grants restricted stock to employees under the 2025 Equity Incentive Plan, which was adopted on April 1, 2025.

During the year ended December 31, 2025, the Company granted 530,890 shares of restricted stock to employees that included service-based vesting conditions and vest over a period of one to three years, subject to a cliff and potential acceleration upon a qualifying liquidity event, including an initial public offering. The aggregate grant date fair value of restricted stock granted during the year ended December 31, 2025 with service-based vesting conditions was $4.6 million. In connection with the IPO, the vesting of 73,500 shares of restricted stock accelerated and the Company recognized approximately $0.7 million of stock-based compensation expense during the second quarter of 2026.

The following table summarizes changes in restricted stock activity, excluding awards with performance-based vesting conditions, during the three months ended April 3, 2026:

During the three months ended April 3, 2026, the Company recognized stock-based compensation expense of approximately $0.6 million which is recorded within general and administrative expense in the accompanying consolidated statement of operations. There were no outstanding stock-based awards that required recognition during the three months ended March 31, 2025.

As of April 3, 2026, the Company had unrecognized stock-based compensation expense of $2.5 million that is expected to be recognized over a weighted-average period of 1.04 years.

During the year ended December 31, 2025, the Company granted 80,000 shares of restricted stock to employees that include a performance-based vesting condition tied to a liquidity event, including an initial public offering, which is not probable until it occurs. The grant date fair value and unrecognized stock-based compensation expense for restricted stock with a performance-based vesting condition was $0.9 million, which will be recognized as stock-based compensation expense when the performance-based vesting condition is probable of being met. In connection with the IPO, the 80,000 shares of restricted stock with performance-based vesting conditions accelerated and the Company recognized $0.9 million of stock-based compensation expense during the second quarter of 2026.

Stock Appreciation Rights

The Company previously granted unit appreciation rights (“UARs”) in a consolidated subsidiary to certain employees which entitle the employees to cash payments upon the occurrence of a qualifying liquidity event. The Company accounted for these awards as a cash-settled profit-sharing bonus arrangement. For the three months ended March 31, 2025, no compensation expense was recorded in these consolidated financial statements related to the unit appreciation rights, as the Company determined that a qualifying liquidity event was not probable.

During the three months ended April 3, 2026, in connection with the Reorganization, the Company modified the UARs and issued replacement awards in the form of 987,700 stock appreciation rights (“SARs”) with an exercise price of $0.91 per SAR. The SARs are accounted for as stock-based compensation and vest based upon a performance-based vesting condition tied to a qualifying liquidity event, including an initial public offering, which is not probable until it occurs. Upon the occurrence of a qualifying liquidity event, the SARs are settleable in cash or common stock at the option of the Company. 677,280 SARs were expected to be settled with common stock (“equity-settled SARs”) and the remaining 310,420 SARs were expected to be settled in cash (“cash settled SARs’).

For the equity-settled SARs, the modification date fair value was approximately $7.2 million, which will be recognized when the performance-based vesting condition is probable of being met. The cash settled SARs are classified as liability awards and the associated compensation cost will be recognized based upon the fair value of the SARs when the performance-based vesting condition is probable of being met upon the occurrence of a qualifying liquidity. In connection with the IPO, all outstanding SARs vested and the Company recognized approximately $11.2 million of stock-based compensation expense during the second quarter of 2026.

For the three months ended April 3, 2026, the Company did not recognize any stock-based compensation expense related to the SARs, as a qualifying liquidity event was not probable. There were no SARs issued prior to the three months ended April 3, 2026.