4. STOCK OPTIONS

The Company’s Stock Plan (the “Plan”) provides for the issuance of incentive stock options, nonqualified stock options, and stock purchase rights. The exercise price of options was determined by the Company’s board of directors, but incentive stock options were granted at an exercise price equal to the fair market value of the Company’s common stock as of the grant date. Options generally vest over three years and expire ten years from the date of grant. The aggregate number of common shares that may be issued or reserved pursuant to stock option or other awards under the plan may not exceed 2,500,000 common shares. During the six months ended June 30, 2026, the Company granted 75,000 stock options under the Plan. As of June 30, 2026, shares available for issuance under the Plan were 648,000.

In addition to awards granted under the Plan, the Company issued stock options outside of the Plan that were approved by the Board of Directors. During the six months ended June 30, 2026, the Company granted 550,000 stock options outside of the Plan. These awards do not reduce the number of shares available for issuance under the Plan.

The following tables summarize the Company’s stock option activity and related information for the six months ended June 30, 2026 and 2025. The activity presented includes options granted both under and outside of the Plan:

The aggregate intrinsic value is calculated as the difference between the Company’s closing stock price as of June 30, 2026 and the exercise price, multiplied by the number of options. As of June 30, 2026, there was $192 thousand of unrecognized stock-based compensation expense. Such costs are expected to be recognized over a weighted average period of approximately 2.3 years.

During the six months ended June 30, 2026, the Company granted 625,000 stock options with a weighted-average exercise price equal to the closing market price of the Company’s common stock on the date of grant. The grant-date fair value of the options was estimated using the Black-Scholes option pricing model with the following assumptions: expected term of 6.1 years, stock price of $0.29, exercise price of $0.29, volatility of 193.4%, risk-free interest rate of 3.8%, and no expected dividends. The weighted-average grant-date fair value of options granted during the period was $0.29. Based on these assumptions, the total grant-date fair value of options granted during the six months ended June 30, 2026 was approximately $178 thousand.

The Company recognizes stock-based compensation expense related to stock options on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period. During the six months ended June 30, 2026 and 2025, the Company recognized expense for stock options of $70 thousand and $59 thousand, respectively.