Ideal Power Inc. Leases Disclosure

Note 7 — Lease

 

In March 2021, the Company entered into a lease agreement (the “Original Lease”) for 4,070 square feet of office and laboratory space located in Austin, Texas (the “Original Suite”). The commencement of the lease occurred on June 1, 2021 and the initial term of the lease was 63 months.

 

In April 2024, the Company entered into a first amendment and relocation agreement (the “Amended Lease”) with its landlord. Under the Amended Lease, the Company relocated to another, larger suite in the same office building. The Amended Lease is for 5,775 square feet of office and laboratory space (the “New Suite”) and, upon occupancy, replaced the 4,070 square feet of office and laboratory space previously leased by the Company. The term of the Amended Lease expires sixty-two (62) months from July 1, 2024, the commencement date. The annual base rent for the first year of the Amended Lease is $118,388 and the annual base rent increases approximately 2.75% each year during the lease term. The Company is required to pay its proportionate share of operating costs for the building under this triple net lease.

 

In accordance with ASC 842, the Company accounted for the modification of the lease contract as a separate lease contract. The lease for the Original Suite terminated on June 30, 2024 and the Company recorded a gain on the termination of the lease for the Original Suite of $15,319 in general and administrative expenses. The Company recognized a right of use asset of $524,025 and a corresponding lease liability for the Amended Lease on the commencement date. For purposes of calculating the right of use asset and lease liability, the Company estimated its incremental borrowing rate at 8.5% per annum.

 

Future minimum payments under the Amended Lease are as follows:

 

For the Year Ended December 31,
2026		$	123,297
2027			126,703
2028			130,197
2029			88,579
Total lease payments			468,776
Less: imputed interest			(65,441	)
Total lease liability			403,335
Less: current portion of lease liability			(93,435	)
Long-term lease liability		$	309,900

 

For the year ended December 31, 2025, operating cash outflows for lease payments totaled $120,005, and the operating lease cost, recognized on a straight-line basis, totaled $123,424. For the year ended December 31, 2024, operating cash outflows for lease payments totaled $99,046 and the operating lease cost, recognized on a straight-line basis, totaled $100,466. At December 31, 2025, the remaining lease term was 44 months.