Ideal Power Inc. Stock Compensation Disclosure

Note 10 — Equity Incentive Plan

 

In May 2013, the Company adopted the 2013 Equity Incentive Plan (as amended and restated, the “Plan”) and reserved shares of common stock for issuance under the Plan, which was last amended in June 2023. The plan is administered by the Compensation Committee of the Company’s Board of Directors (the “Board”). At December 31, 2025, there were 240,567 shares of common stock available for issuance under the Plan.

 

During the year ended December 31, 2025, the Company granted 38,660 restricted stock units to Board members, 40,000 restricted stock units and 80,000 performance stock units to executives, and 230,427 restricted stock units and 30,000 performance stock units to employees under the Plan. The estimated fair value of these equity grants was $2,029,516, of which $755,500 was recognized in the respective department expenses in the accompanying statements of operations for the year ended December 31, 2025.

 

In connection with the retirement of the Company’s former CEO, certain of his awards were modified and he forfeited 70,000 performance stock units prior to achievement of the underlying performance metrics. The grant date fair value of, and previously recognized expense for, these performance stock units of $597,841 was recognized as a reduction in research and development expenses in the accompanying statements of operations for the year ended December 31, 2025. The former CEO’s unvested restricted stock units, otherwise subject to forfeiture, were modified to vest fifty percent (50%) on January 3, 2026 and fifty percent (50%) on April 3, 2026, subject to his continued service as a consultant through the vesting dates. In addition, a prior grant of 60,000 performance stock units, otherwise subject to forfeiture, were modified to remain outstanding and be eligible for vesting through November 2, 2026 subject to his continued service as a consultant through the vesting date. The incremental cost of these modifications was $600,566 and is being recognized over the requisite service period, as applicable.

 

During the year ended December 31, 2025, the Company granted awards of 247,438 restricted stock units and 247,438 performance stock units to its CEO as a material inducement to enter into employment with the Company. The inducement awards were granted outside of the Plan but are subject to its applicable terms. The estimated fair value of these equity awards was $2,083,739, of which $67,712 was recognized in general and administrative expenses in the accompanying statements of operations for the year ended December 31, 2025.

 

During the year ended December 31, 2024, the Company granted 38,710 restricted stock units to Board members, 125,000 restricted stock units to executives and 128,922 restricted stock units to employees under the Plan. The estimated fair value of these equity grants was $2,072,676, of which $541,957 was recognized in the respective department expenses in the accompanying statements of operations for the year ended December 31, 2024.

 

As permitted by SAB 107, management utilizes the simplified approach to estimate the expected term of stock options, which represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. treasury yield in effect at the time of grant. The volatility is estimated based on the historical volatilities of comparable companies. The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

 

No stock options were granted in the years ended December 31, 2025 and 2024.

 

A summary of the Company’s stock option activity and related information is as follows:

 

		2025												2024
										Weighted												Weighted
						Weighted				Average								Weighted				Average
						Average				Remaining								Average				Remaining
		Stock				Exercise				Life				Stock				Exercise				Life
		Options				Price				(in years)				Options				Price				(in years)
Outstanding at January 1			509,414			$	7.56				4.6				525,948			$	7.69				5.7
Granted			—			$	—								—			$	—
Exercised			—			$	—								(8,334	)		$	10.41
Forfeited / Expired			(138,600	)		$	7.78								(8,200	)		$	12.95
Outstanding at December 31			370,814			$	7.48				2.6				509,414			$	7.56				4.6
Exercisable at December 31			370,814			$	7.48				2.6				497,414			$	7.44				4.5

 

The following table sets forth additional information about stock options outstanding at December 31, 2024:

 

								Weighted
								Average				Weighted
								Remaining				Average
				Options				Life				Exercise				Options
Range of Exercise Prices				Outstanding				(in years)				Price				Exercisable
$1.99	–	$2.85			122,557				2.1			$	2.36				122,557
$4.25	–	$9.31			176,736				2.9			$	7.33				176,736
$10.41	–	$17.25			67,468				2.8			$	14.86				67,468
$31.50	–	$79.40			4,053				0.7			$	46.45				4,053
					370,814												370,814

 

Stock options granted under the Plan have ten-year terms. All outstanding stock options are exercisable at December 31, 2025.

 

The estimated aggregate pretax intrinsic value (the difference between the Company’s stock price on the last day of the year ended December 31, 2025 and the exercise prices, multiplied by the number of in-the-money options) is $89,764 for outstanding options. This amount changes based on the fair value of the Company’s stock.

 

A summary of the Company’s restricted stock unit (“RSU”) and performance stock unit (“PSU”) activity is as follows:

 

		2025								2024
		RSUs				PSUs				RSUs				PSUs
Outstanding at January 1			331,715				114,000				171,530				114,000
Granted			556,525				357,438				292,632				—
Vested			(121,252	)			—				(130,447	)			—
Forfeited			(121,431	)			(114,000	)			(2,000	)			—
Outstanding at December 31			645,557				357,438				331,715				114,000

 

In the year ended December 31, 2025, 121,252 restricted stock units vested of which 29,356 restricted stock units were forfeited to cover employee and executive payroll tax withholding obligations. In the year ended December 31, 2024, 130,447 restricted stock units vested of which 31,450 restricted stock units were forfeited to cover employee and executive payroll tax withholding obligations. The payment of the taxes on the vesting of the restricted stock units is shown as a financing activity on the accompanying statements of cash flows.

 

As of December 31, 2025, there was $3,874,071 of unrecognized compensation cost related to non-vested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 1.0 years.