Stock-Based Compensation

12 Months Ended

Dec. 31, 2025

Share-Based Payment Arrangement [Abstract]

10. Stock-Based Compensation

2021 Stock Plan

The Company's 2021 Equity Incentive Plan (the "2021 Plan") provides stock options, restricted stock units ("RSUs"), restricted stock awards ("RSAs"), stock appreciation rights ("SARS") and performance awards for issuance to Company employees, officers, directors, non-employee agents and consultants. In general, outstanding awards granted under the 2021 Plan vest over one to four years and, in the case of options, are exercisable up to 10 years from the date of grant. The maximum number of shares of Common Stock that may be issued pursuant to the 2021 Plan is (a) 5.0 million shares of Common Stock of the Company plus (b) any shares of Common Stock subject to stock options and other awards that were assumed in the Business Combination and expire or otherwise terminate without having been exercised in full, are tendered to or withheld by the Company for payment of an exercise price or for tax withholding obligations, or are forfeited to or repurchased by the Company due to failure to vest, with the maximum number of shares to be added to the 2021 Plan pursuant to clause (b) equal to 2.1 million shares of Common Stock. As of December 31, 2025, 1.9 million shares were available for grant under the 2021 Plan.

2015 Stock Plan

The Old Sarcos 2015 Equity Incentive Plan (the "2015 Plan") provided stock options, RSUs, RSAs, SARS and performance awards for issuance to Old Sarcos' employees, officers, directors, non-employee agents and consultants. Outstanding awards under the 2015 Plan generally vest over three to five years and are exercisable up to 10 years from the date of grant. Unvested options are forfeited upon termination. No further awards may be made under the 2015 Plan. Any forfeited awards will be added to the 2021 Plan as described above.

2024 Inducement Plan

The Company adopted the 2024 Inducement Equity Incentive Plan (the "Inducement Plan") with an effective date of December 15, 2024 to be used exclusively for grants of nonstatutory stock options, RSUs, RSAs, SARS and performance awards to individuals who were not previously employees or directors of the Company (or who are returning to employment following a bona fide period of non-employment), as an inducement material to the individual's entry into employment with the Company. The Inducement Plan was adopted and approved without stockholder approval pursuant to Nasdaq Listing Rule 5635(c)(4). As of December 31, 2025, 202,792 shares were available to grant under the Inducement Plan.

2021 Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan (the "ESPP") provides for the issuance of shares of Common Stock pursuant to purchase rights granted to employees over designated offering periods, by funds accumulated primarily through elective payroll deductions. Offerings under the ESPP commenced in December 2024. As of December 31, 2025, 469,087 shares were available for sale under the ESPP. During the year ended December 31, 2025, 30,913 shares of stock were sold under the ESPP for total proceeds of $0.1 million. No shares of stock were sold under ESPP during the year ended December 31, 2024.

Offering periods are generally six months long and begin on June 1 and December 1 of each year. The purchase price for shares of Common Stock purchased under the ESPP is calculated as 85% of the lesser of the fair market value of the Common Stock on (1) the first trading day of the applicable offering period or (2) the last trading day of the offering period.

Stock Option Activity

The following summarizes the Company's stock option activity for the years ended December 31, 2025 and 2024:


	Options Outstanding					Weighted-Average
				Weighted Average		Remaining		Aggregate Intrinsic
				Exercise Price		Contractual Term		Value
	Number of Shares			(Per share)		(In years)		(In thousands)
Outstanding – December 31, 2023		2,845,084		$	9.82		7.2	$	91
Granted		555,000		1.77
Exercised		(203,480	)	0.64				703
Forfeited or expired		(1,799,647	)	10.93
Outstanding – December 31, 2024		1,396,957		$	1.88		7.5	$	14,519
Granted		81,667			7.20
Exercised		(57,447	)		1.30
Forfeited or expired		(220,609	)		1.60
Outstanding – December 31, 2025		1,200,568		$	2.32		6.5	$	2,619
Exercisable – December 31, 2024		443,045		$	2.05		5.2	$	4,527
Exercisable – December 31, 2025		845,217		$	2.12		6.0	$	1,888

For options granted during the years ended December 31, 2025 and 2024, the weighted-average grant-date fair value was $5.86 and $1.26 per option, respectively.

The Company utilizes the Black-Scholes option pricing model for estimating the fair value of options granted, which requires the input of subjective assumptions. The Company calculates the fair value of each option grant on the grant date using the following assumptions:

Expected Term—Options granted generally vest over a period of 48 months and expire 10 years from date of grant. The Company uses the simplified method when calculating expected term due to insufficient historical information.

Expected Volatility—Due to insufficient historical information the Company uses a blended approach when calculating expected volatility. The Company uses its historic data for the periods it has been publicly-traded and a benchmark of other comparable public companies' volatility rates.

Expected Dividend Yield—The dividend yield used is zero as the Company does not have a history of paying dividends on its Common Stock and does not anticipate doing so in the foreseeable future.

Risk-Free Interest Rate—The interest rates used are based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.

The Company calculated the fair value of options granted under the 2021 Plan on the respective dates of grant using the following weighted average assumptions:


	Year Ended December 31,
	2025			2024
Options
Risk-free interest rate		3.87	%		4.31	%
Expected term (in years)	3.4			5.89
Expected dividend yield		—	%		—	%
Expected volatility		106.42	%		80.39	%

Option Repricing

On April 17, 2024, the Company amended certain options to purchase 773,551 shares of the Company's Common Stock. All of the options subject to the amendments had exercise prices that exceeded the value of the Company's Common Stock on the amendment date.

One set of amendments, which were entered into with seven senior employees of the Company, applied to options to purchase an aggregate of 225,670 shares held by those seven senior employees. These amendments (1) re-started the vesting schedule of the amended options, including for options that had already vested and (2) reduced the per share exercise price of the options to $1.59 (the "New Exercise Price"), which is equal to the closing price of the Company's Common Stock on April 17, 2024, the effective date of the amendments. No other terms of these options were modified.

The other set of amendments applied to options to purchase an aggregate of 547,881 shares held by other eligible current employees and service providers of the Company with an exercise price per share greater than the New Exercise Price. These amendments reduced the per share exercise price of affected options to the New Exercise Price, which is equal to the closing price of the Company's Common Stock on April 17, 2024, the effective date of the amendments. No other terms of such options were modified.

The total incremental fair value to be recognized as a result of the amendments was $0.2 million. The incremental fair value attributable to the vested options of $0.1 million was recognized as stock-based compensation expense during the twelve months ended December 31, 2024. The remaining incremental fair value attributable to the unvested option shares will be amortized over the remaining requisite service periods.

Restricted Stock Units

The following summarizes the Company's employee RSU activity for the years ended December 31, 2025 and 2024:


	Restricted Stock Units Outstanding
	Number of Shares			Weighted-Average Grant-Date Fair Value (Per share)
Outstanding – December 31, 2023		1,180,115		$	4.49
Granted		1,544,319			1.00
Released		(333,553	)		3.99
Forfeited		(933,600	)	3.37
Outstanding – December 31, 2024		1,457,281		$	1.62
Granted		1,051,902			6.30
Vested		(740,156	)		1.72
Forfeited		(191,633	)		4.29
Outstanding – December 31, 2025		1,577,394		$	4.34

RSUs granted generally include service vesting periods of one to four years.

Restricted Stock Awards

The following summarizes the Company's employee RSA activity for the year ended December 31, 2025:


	Restricted Stock Awards Outstanding
	Number of Shares			Weighted-Average Grant-Date Fair Value (Per share)
Outstanding – December 31, 2023		—		$	—
Granted		625,000			0.59
Outstanding – December 31, 2024		625,000		$	0.59
Granted		1,500,000			2.23
Vested		(625,000	)	0.59
Outstanding – December 31, 2025		1,500,000		$	2.23

Stock-Based Compensation Expense

The Company recognized stock-based compensation expense in the consolidated statement of operations and comprehensive loss as follows:


	Year Ended December 31,
(In thousands)	2025		2024
Cost of revenue	$	52	$	30
Research and development		428		115
Sales and marketing		701		604
General and administrative		3,266		2,056
Total stock-based compensation expense	$	4,447	$	2,805

As of December 31, 2025, there was approximately $8.6 million of unrecognized stock-based compensation expense, which is expected to be recognized over a weighted average period of 2.6 years.

Palladyne AI Corp. 10-K