The Ethan Allen Interiors Inc. Stock Incentive Plan (the “Plan”) provides for the grant of stock-based awards including stock options, restricted stock and stock units. The Plan also provides for the issuance of stock appreciation rights (“SARs”) on issued options, however no SARs have been issued to date. All stock-based awards are approved by the Compensation Committee of the Board of Directors after consideration of the recommendations proposed by the Chief Executive Officer. Company policy requires an additional one-year holding period beyond the service vest date for executive officers and Board of Directors. Under this Plan, the initial aggregate number of shares of common stock that may be issued through awards of any form was 6,487,867 shares. At June 30, 2026, there were 1,178,976 shares of common stock available for future issuance pursuant to the Plan.

The table below summarizes the total stock-based compensation expense we recognized for all outstanding stock-based awards. Stock-based compensation expense is recorded in SG&A expenses in the consolidated statement of income (in thousands):

At June 30, 2026, $1.3 million of total unrecognized compensation expense related to non-vested stock-based awards is expected to be recognized over a weighted average period of 1.6 years. There was no stock-based compensation capitalized at June 30, 2026 and 2025.

Stock Options

All stock options granted have an exercise price equal to the fair market value of our common stock on the date of grant and remain exercisable for a period of up to ten years, subject to continuous service. We granted 16,905 stock options at an exercise price of $29.58 to our non-employee directors during fiscal 2026. These options vest in three annual installments beginning on the first anniversary of the date of grant so long as the director continues to serve on our Board. There were no stock option awards granted to employees during fiscal 2026, 2025 or 2024. 

The assumptions used to calculate the fair value of stock options granted using the Black-Scholes option pricing model during each fiscal year are presented below:

A summary of stock option activity is presented below.

There were no stock options exercised during fiscal 2026. We received proceeds of less than $0.1 million from stock options exercised during fiscal 2025 compared with $0.5 million in proceeds received during fiscal 2024. The aggregate intrinsic value of stock options exercised was less than $0.1 million in fiscal 2025 compared with $0.1 million during fiscal 2024.

At June 30, 2026, $0.1 million of total unrecognized compensation expense related to non-vested stock options is expected to be recognized over a weighted average remaining period of 1.8 years.

Restricted Stock Units (“RSUs”)

The RSUs granted to employees entitle the holder to receive the underlying shares of common stock as the unit vests over the relevant vesting period. The RSUs do not entitle the holder to receive dividends declared on the underlying shares while the RSUs remain unvested and vest in three equal annual installments on the anniversary of the date of grant. We account for these RSUs as equity-based awards because when they vest, they will be settled in shares of our common stock. The grant date fair value of RSUs is measured by reducing the grant date price of the Company's common stock by the present value of the dividends expected to be paid on the underlying stock during the requisite service period, discounted at the appropriate risk-free interest rate.

A summary of RSU activity is presented below.

The weighted average grant date fair value of RSUs awarded in fiscal 2026, 2025, and 2024 were $23.69, $24.04, and $28.58 per share, respectively. At June 30, 2026, $0.5 million of total unrecognized compensation expense related to non-vested RSUs is expected to be recognized over a weighted average remaining period of 1.7 years.

Performance Stock Units (“PSUs”)

Under the Plan, the Compensation Committee of the Board of Directors is authorized to award common shares to certain employees based on the attainment of certain financial goals over a given performance period. The awards are offered at no cost to the employees. In the event of an employee's termination during the performance period, the right to earn shares under this program is forfeited.

During fiscal 2026, we granted 88,526 PSUs, and we also have PSU awards outstanding from grants in fiscal 2025 and fiscal 2024. Payout of these grants depends on our financial performance (80%) and a market-based condition based on the total return our shareholders receive on their investment in our stock relative to returns earned through investments in other peer public companies (20%). The performance share opportunity ranges from 62% of the employee's target award if minimum performance requirements are met to a maximum of 138% of the target award based on the attainment of certain financial and shareholder-return goals over a specific performance period, which is generally three fiscal years.

The following table summarizes PSU activity at the maximum award amounts:

The number of awards that will vest, as well as unearned and canceled awards, depend on the achievement of certain financial and shareholder-return goals over the three-year performance periods, and will be settled in shares if service conditions are met, requiring employees to remain employed with us through the end of the three-year performance periods. We account for PSU awards as equity-based awards because upon vesting, they will be settled in common shares. We expense as compensation cost the fair value of the PSUs as of the grant date and amortize expense ratably over the total performance and time vest period, considering the probability that we will satisfy the performance goals.

The following table presents the fair value of PSUs granted for each of the past three fiscal years:

At June 30, 2026, $0.6 million of total unrecognized compensation expense related to non-vested PSUs is expected to be recognized over a weighted average remaining period of 1.6 years.

Stock-based compensation expense related to PSUs recognized in our consolidated statements of comprehensive income are presented in the following table (in thousands).