11. Non-Cash Share-Based Compensation

The Company’s stockholders approved the BK Technologies Corporation 2025 Incentive Compensation Plan (the “2025 Plan”) at the 2025 Annual Meeting of Stockholders of the Company (the “Annual Meeting”) held on June 18, 2025. The 2025 Plan was previously approved by the Company’s Board of Directors (the “Board”). The 2025 Plan replaces the 2017 Incentive Compensation Plan (the “Prior Plan”). No new awards will be granted under the Prior Plan after the date of the Annual Meeting. However, all awards granted under the Prior Plan that were outstanding on the date of the Annual Meeting will remain outstanding in accordance with their terms. The 2025 Plan authorizes the grant of equity-based and cash-based compensation awards to officers, directors, and employees of, and consultants to, the Company and its subsidiaries. Awards under the 2025 Plan may be granted in the form of stock options, stock appreciation rights, restricted shares, restricted share units, other share-based awards, and cash-based awards. There are 500,000 shares of the Company’s common stock reserved for issuance under the 2025 Plan. No awards may be granted under the 2025 Plan after March 11, 2035.

The stockholders of the Company also approved the BK Technologies Corporation Employee Stock Purchase Plan (the “ESPP”) at the Annual Meeting held on June 18, 2025. The ESPP was previously approved by the Board. The objective of the ESPP is to offer eligible employees of the Company and its designated subsidiaries the ability to purchase shares of the Company’s common stock at a discount, subject to various limitations under the ESPP. There are 150,000 shares of the Company’s common stock authorized for issuance under the ESPP.  As of  December 31, 2025, the Company issued 2,892 shares of common stock from its treasury share account pursuant to the ESPP

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Stock Options

The Company has an employee and non-employee director incentive compensation equity plan. Related to these programs, the Company recorded $1,030 and $286 of share-based employee compensation expense related to stock options during the years ended December 31, 2025 and 2024, respectively, which is included as a component of cost of products and SG&A expenses in the accompanying consolidated statements of operations. No amount of share-based employee compensation expense was capitalized as part of capital expenditures or inventory for the years presented.

The Company uses the Black-Scholes-Merton option valuation model to calculate the fair value of a stock option grant. The share-based employee compensation expense recorded in the years ended December 31, 2025 and 2024 was calculated using the assumptions noted in the following table. Expected volatilities are based on the historical volatility of the Company’s common stock over the period of time, commensurate with the expected life of the stock options. The dividend yield assumption is based on the Company’s expectations of dividend payouts at the grant date. The Company has estimated its future stock option exercises. The expected term of option grants is based upon the observed and expected time to the date of post vesting exercises and forfeitures of options by the Company’s employees. The risk-free interest rate is derived from the average U.S. Treasury rate for the period, which approximates the rate at the time of the stock option grant.

A summary of stock option activity under the Company’s equity compensation plans as of December 31, 2025, and changes during the year ended December 31, 2025, are presented below:

11. Share-Based Compensation (Continued)

Outstanding:

Exercisable:

The weighted-average grant-date fair value per option granted during the years ended December 31, 2025 and 2024 was $41.78 and $6.39, respectively.  There were 32,951 and 6,200 stock options exercised during the years ended December 31, 2025 and 2024, respectively.

Restricted Stock Units

In connection with the restricted stock units (sometimes referred to as "RSUs") granted to non-employee directors, the Company accrues compensation expense based on the estimated number of shares expected to be issued, utilizing the most current information available to the Company at the date of the consolidated financial statements.  The Company estimates the fair value of the restricted stock unit awards based upon the market price of the underlying common stock on the date of grant.

A summary of non-vested restricted stock units under the Company’s non-employee director share-based incentive compensation plan is as follows:

During 2024, the Company’s Board of Directors approved the Executive Salary Swap Plan to prospectively swap a portion of certain executive’s salaries for a 12 month period (5% minimum, up to 25%) otherwise payable in cash for a grant of RSUs (with each RSU representing a contingent right to receive one share of the Company’s Common Stock) at a fixed rate of $12 per share, rounded down to the nearest whole RSU.  The Restricted Stock Units vested at the date of the grant. The Company issued 2,882 and 3,764 RSUs under this arrangement for the year ended December 31, 2025, and 2024.

During 2023, the Company’s Board of Directors approved the Executive Salary Swap Plan to prospectively swap a portion of certain executive’s salaries for a 12 month period (10% minimum, up to 50%) otherwise payable in cash for a grant of RSUs (with each RSU representing a contingent right to receive one share of the Company’s Common Stock) at a fixed rate of $10 per share, rounded down to the nearest whole RSU.  The Restricted Stock Units vested at the date of the grant. The Company did not issue RSUs under this arrangement for the year ended December 31, 2025 and issued 13,979 RSUs under this arrangement for the period ended December 31, 2024.

As of December 31, 2025 and 2024, there was approximately $5,900 and $1,419, respectively, of total unrecognized compensation cost related to non-vested share-based compensation arrangements, including stock options and restricted stock units. This compensation cost is expected to be recognized approximately over one to 2.6 years.