Note 3 — Stock-Based Compensation and Stock Options

The Company’s Restated Omnibus Incentive Plan (formerly the Restated 1988 Executive Stock Option Plan) (the “Omnibus Plan”) expired on June 30, 2026. Under the Omnibus Plan, the Company had 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 that were 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 that were granted to employees will expire five years from the grant date, and options that were granted to directors will expire ten years from the grant date. No options were granted in the three months ended June 30, 2026. In the three months ended June 30, 2025, all options were granted with an exercise price equal to the fair market value of the Company’s common stock on the grant date and are non-statutory stock options. Beginning August 7, 2025, no further grants were permitted to be made under the Omnibus Plan. At the end of the Omnibus Plan, 1,185,727 stock options were outstanding. 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. Consistent with the Omnibus Plan, the primary purpose of the 2025 SIP is to attract and retain qualified personnel. The 2025 SIP initially had 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 June 30, 2026, 1,483,359 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. No options were granted during the three months ended June 30, 2026. The following assumptions were used to estimate the fair value of stock options granted during the three months ended June 30, 2025, using the Black-Scholes option-pricing model:

For the three months ended June 30, 2026 and 2025, the Company recorded stock-based compensation expense of $1,360,000 and $1,417,000, respectively. The table below shows the amounts recognized in the unaudited consolidated financial statements for stock-based compensation expense for all stock options during the three months ended June 30, 2026 and 2025, respectively.

There were no options granted during the three months ended June 30, 2026. The weighted-average grant-date fair value of stock options granted during the three months ended June 30, 2025 was $33.73.

The stock option grants and stock-based compensation expense reflected above include both time-based stock options, which vest upon the satisfaction of time-based service conditions, and performance-based stock options, which vest upon the Company’s achievement of certain pre-determined earnings per share targets assessed on a calendar year basis by the Company’s Board of Directors (the “Board”). Performance-based stock options are generally valued in the same manner as time-based stock options, however, compensation expense is recognized only to the extent it is probable the targets will be achieved. The Company recognized stock-based compensation expense for performance-based stock options of $334,000 and $427,000 for the three months ended June 30, 2026 and 2025, respectively.