NOTE 9 – EQUITY INCENTIVE PLAN

In August 2017, the Company approved and adopted the 2017 Equity Award Plan (the “2017 Plan”). The 2017 Plan permits the granting of stock options, stock appreciation rights, restricted and unrestricted stock awards, phantom stock, performance awards and other stock-based awards for the purpose of attracting and retaining quality employees, directors and consultants. As of March 31, 2026, an aggregate of 15,280,949 shares of common stock were authorized for issuance under the 2017 Plan.

Stock Options

Stock options granted under the 2017 Plan may be either incentive stock options (“ISOs”) or non-qualified stock options (“NSOs”). ISOs may be granted to employees and NSOs may be granted to employees, directors, or consultants. Stock options are granted at exercise prices as determined by the Board of Directors. The vesting period is generally three years with a contractual term of ten years.

For the three months ended March 31, 2026 and 2025 there was no stock compensation expense related to stock options. 

A summary of stock option activity under the Company’s 2017 Plan during the period ended March 31, 2026 is as follows:

As of March 31, 2026, there was $0 of unrecognized stock compensation expense related to unvested stock options granted under the 2017 Plan.

Restricted Stock Units

Stock compensation expense related to Restricted Stock Units ("RSUs") for the three months ended March 31, 2026 and 2025 was $922,000 and $1,370,000 respectively, and is presented based on the awardees' operating department, as general administrative, selling and marketing and research and development expenses in the unaudited condensed consolidated statements of operations.

On March 20, 2026, in connection with the Company's amended and restated employment agreement with Robert A. Berman, the Company's President and Chief Executive Officer, the Company granted 1,000,000 fully vested shares of common stock to Mr. Berman, with a grant date fair value of $0.88 per share, resulting in $880,000 of stock-based compensation expense recorded during the three months ended March 31, 2026. These shares were issued to Mr. Berman in April 2026.

A summary of RSU activity under the Company’s 2017 Plan for the three months ended March 31, 2026 is as follows:

All RSUs granted vest upon the satisfaction of a service-based vesting condition.

As of March 31, 2026, there was $482,000 of unrecognized stock compensation expense related to unvested RSUs granted under the 2017 Plan that will be recognized over an average remaining period of 1.5 years.

Rekor Labs Profit Interests

On March 25, 2026, Rekor Labs, LLC (“Rekor Labs”), a consolidated subsidiary of the Company, adopted an amended and restated limited liability company agreement and authorized the issuance of profits interests to certain service providers. In connection with that authorization, Rekor Labs granted profits interests to certain service providers representing 3.5% of Rekor Labs’ fully diluted equity as of the grant date, subject to the terms and conditions of the applicable grant agreements and the amended and restated limited liability company agreement.

The profits interests are subject to a participation threshold of $5,000. The profits interests vest in full upon the consummation of a Fundamental Transaction, as defined in the amended and restated limited liability company agreement, within six months following the grant date, subject to the applicable participant’s continued service through the applicable vesting date.

The Company accounts for the profits interest awards as share-based compensation arrangements under ASC 718, Compensation — Stock Compensation. Because vesting of the awards is contingent upon the occurrence of a Fundamental Transaction within six months following the grant date, the Company evaluated whether the vesting condition was probable as of March 31, 2026. As of March 31, 2026, the Company determined that the vesting condition was not probable and, accordingly, no compensation expense was recognized related to the awards during the three months ended March 31, 2026. The Company will continue to reassess the probability of vesting at each reporting date. If the vesting condition becomes probable, the Company will recognize compensation expense based on the grant-date fair value of the awards over the requisite service period, including any cumulative catch-up adjustment required under ASC 718.