Stock-Based Compensation

As discussed in Note 7, Deep Isolation previously maintained the 2018 Plan, under which Deep Isolation previously granted stock options. The 2018 Plan had authorized only Nonstatutory Stock Options (“NSOs”) and Incentive Stock Options (“ISOs”).

The Company currently maintains the 2025 Plan, which was approved and adopted pursuant to the Merger Agreement, under which the Company may grant options, stock appreciation rights, restricted stock, restricted stock units, performance units, performance shares and other stock-based awards to employees, directors and consultants of the Company. Upon the termination of the 2018 Plan, the Assumed Options from the 2018 Plan were assumed by the 2025 Plan and are now subject to the terms and conditions of the 2025 Plan.

The term of each stock option granted under the 2025 Plan shall be fixed by the Board, or the Board may delegate administration of the Plan to the Board’s Compensation Committee (the “Plan Administrator”). For most grants governed by the 2025 Plan, 25% of the options granted vest after one year of service and then on a monthly basis over three years of service thereafter. Most grants under the 2025 Plan have been for a term of ten years for continued service. Options are granted in varying amounts and frequency to the Company’s directors, advisors and employees at the discretion of the Board. No stock options will be exercisable more than ten years after the grant date, or, in the case of an ISO granted to a 10% stockholder, more than five years after the grant date. The exercise price of any ISO granted under the Plans to an individual who is not a 10% stockholder at the time of the grant shall not be less than the fair market value of the shares at the time of the grant. The exercise price of any ISO granted to a 10% stockholder shall not be less than 110% of the fair market value at the time of the grant. The exercise price of any NSOs granted under the Plans shall not be less than the fair market value of the shares at the time of the grant. The number of shares reserved for issuance under the 2025 Plan will increase automatically at the beginning of each fiscal year in an amount by 4% of the shares of the Company’s common stock outstanding on the last day of the immediately preceding fiscal year. On January 1, 2026, the number of shares reserved for issuance under the 2025 Plan increased by 2,301,685 shares. As of June 30, 2026, the Company has reserved 13,054,251 shares of the Company’s common stock (the “Share Reserve”) for future issuance under all option arrangements and had 5,992,435 shares available for issuance.

The total compensation expense recognized for common share options during the six months ended June 30, 2026 and 2025, were $885 thousand and $55 thousand, respectively. Stock-based compensation is recognized in cost of services and selling, general and administrative expense.

The summary of the Company’s Plans as of June 30, 2026, and changes during the period then ended are presented as follows:


Stock Options	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2025	6,230,759	$	0.37
Granted	123,000	3.00
Exercised	(60,000)	0.07
Forfeited	0	—
Expired	(5,393)	0.32
Outstanding, June 30, 2026	6,288,366	$	0.42	5.73	$	16,201
Exercisable, June 30, 2026	5,689,692	$	0.15	5.35	$	16,201

The weighted average grant date fair value of options granted during the three months ended June 30, 2026 was $1.10 per share, and during the six months ended June 30, 2026 was $1.07 per share based on the following assumptions used in the Black-Scholes option pricing model:


	June 30, 2026

Expected volatility	28	%
Expected dividend yield	-	%
Expected term (in years)	6 years
Risk-free interest rate	3.6% to 4.2%

The fair value of options granted for the six months ended June 30, 2026 was $131 thousand. Total unrecognized stock option compensation expense as of June 30, 2026 and 2025 were $407 thousand and $193 thousand, respectively, with a weighted-average period over which it is expected to be recognized of 5.7 years and 2.8 years, respectively . Cash received from the exercise of stock options totaled $4 thousand for the six months ended June 30, 2026. The Company estimates fair value of stock options using the Black-Scholes valuation model.

During the year ended December 31, 2025, the Company issued 12,500 performance options to the CEO which would have vested upon the satisfaction of certain performance conditions as of March 31, 2026. These performance conditions were not met as of March 31, 2026 and the options were forfeited. No compensation expense was recorded for performance options for the six months ended June 30, 2026.

Restricted Stock Units

The summary of the Company’s restricted stock units (“RSUs”) activity for the six months ended June 30, 2026 are presented as follows:


	Number of RSUs	Weighted Average Grant Date Fair Value per RSU
Unvested RSUs, December 31, 2025	366,810		$	3.00
Granted	298,833		3.00
Vested/Issued	(80,764)		3.00
Forfeited, cancelled, or expired	—		3.00
Unvested RSUs, June 30, 2026	584,879		$	3.00

Performance Stock Units