Quarterly report [Sections 13 or 15(d)]

Stock-Based Compensation

Stock-Based Compensation

3 Months Ended

Mar. 31, 2026

On December 22, 2005, our Board of Directors adopted Tecogen's 2006 Stock Option and Incentive Plan ("2006 Plan") under which the Board of Directors or a committee appointed by the Board of Directors may grant incentive stock options to officers and employees and may grant non-qualified stock options, restricted stock and stock to officers, employees, directors, advisors and consultants. The 2006 Plan was amended at various dates by the Board of Directors to increase the number of shares of common stock reserved for issuance under the Plan to 3,838,750, and, in June 2017, stockholders approved an amendment to extend the termination date of the Plan to January 1, 2026 (2006 Plan as amended, "Amended Plan").

Stock options vest based upon the terms of each individual option grant with an acceleration of the unvested portion of such options upon a change of control event, as defined in the Amended Plan. The options are not transferable except by will or domestic relations order. Under the Internal Revenue Code, the option exercise price per share under the Amended Plan cannot be less than the fair market value of the underlying shares on the date of the grant. Incentive stock options granted to an officer or employee owning more than 10% of the combined voting power of the Company, are required to be exercisable at a price per share equal to 110% of the fair market value of a share on the date of grant and such options are not exercisable after the expiration of five years from the date such option is granted. On January 1, 2026 the Amended Plan expired and no further incentive or non-qualified stock options or other awards may be granted or made under the Amended Plan.

On March 8, 2022, our Board of Directors adopted Tecogen's 2022 Stock Incentive Plan ("2022 Plan"), under which the Board of Directors or a committee appointed by the Board of Directors may grant incentive stock options to officers and employees and grant non-qualified stock options, restricted stock, and stock grants to officers, employees, directors, advisors and consultants. We have reserved 3,800,000 shares of our common stock for issuance pursuant to awards under the 2022 Plan. The adoption of the 2022 Plan was approved by our shareholders on June 9, 2022. The 2022 Plan expires ten years from its effective date or March 1, 2032.

Under the 2022 Plan, stock options vest based upon the terms of each individual option grant with an acceleration of the unvested portion of such options upon a change of control event, as defined in the 2022 Plan. The options are not transferable except by will or domestic relations order. Under the Internal Revenue Code, the option exercise price per share under the Amended Plan cannot be less than the fair market value of the underlying shares on the date of the grant. Incentive stock options granted to an officer or employee owning more than 10% of the combined voting power of the Company are required to be exercisable at a price per share equal to 110% of the fair market value of a share on the date of grant and the option must expire within a period of not more than five years from the date of grant. The number of shares remaining available for future issuance under the Plan as of March 31, 2026 was 2,620,356.

During the year ended December 31, 2025, we recognized $799,997 of unearned compensation due to the issuance of restricted stock awards, with respect to 95,808 shares of common stock priced at $8.35 per share to officers which vest in equal annual installments over the four year period commencing on the date of grant.

During the three months ended March 31, 2026, we granted nonqualified stock options to purchase an aggregate of 50,000 shares of common stock at $2.36 per share to key employees. These options have a vesting schedule of five years and expire in ten years from the date of grant. The fair value of the options issued in the three months ended March 31, 2026 was

$63,920. The weighted-average grant date fair value of stock options granted three months ended March 31, 2026 was $1.28 per share.

During the three months ended March 31, 2026 and 2025, options for 58,750 and 35,000 shares of common stock, respectively, were exercised.

Stock option activity for the three months ended March 31, 2026 was as follows:


Common Stock Options	Number of Options	Exercise Price Per Share					Weighted Average Exercise Price		Weighted Average Remaining Life	Aggregate Intrinsic Value
Outstanding, December 31, 2025	2,347,044	$	0.71	—		$8.61	$	1.90	6.29 years	$	7,961,973
Granted	50,000			$	2.36		$	2.36
Exercised	(58,750)	$	0.88	—		$1.20	$	0.93		$	95,900
Canceled and forfeited	(65,500)	$	0.71	—		$3.93	$	0.95
Outstanding, March 31 2026	2,272,794	$	0.71	—		$8.61	$	1.97	6.10 years	$	2,933,445

Exercisable, March 31, 2026	1,400,458						$	1.26		$	1,980,445
Vested and expected to vest, March 31, 2026	2,141,944						$	1.90		$	2,790,495

We used a forfeiture rate of 15% to calculate the expected to vest shares in the table above. We use the Black-Scholes option pricing model to determine the fair value of stock options granted. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. Expected volatility was calculated based on the average volatility of four comparable publicly traded companies. The average expected life was estimated using the simplified method to determine the expected life based on the vesting period and contractual terms, since we do not have the necessary historical exercise data to determine an expected life for stock options. We use a single weighted-average expected life to value option awards and recognize compensation on a straight-line basis over the requisite service period for each separately vesting portion of the awards. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term which approximates the expected life assumed at the date of grant.

The weighted average assumptions used in the Black-Scholes option pricing model for options granted in three months ended March 31, 2026 and 2025 are as follows:


Stock Option Award Assumptions	March 31, 2026	March 31, 2025
Expected dividend yield	—%	—%
Expected life	6.50 years	6.25 years
Risk-free interest rate	5.20%	4.22%
Expected volatility	49.49%	42.33%

We recognized stock-based compensation expense of $82,486 and $40,833, respectively, for the three months ended March 31, 2026 and 2025. No tax benefit was recognized related to the stock-based compensation recorded during the period. For the three months ended March 31, 2026, we recognized stock-based compensation expense of $49,180 related to restricted stock grant awards. No tax benefit was recognized related to the stock-based compensation expense during the period. At March 31, 2026, the total compensation cost related to unvested stock option awards and restricted stock awards not yet recognized is $1,711,214 and this amount will be recognized over a weighted average period of 2.17 years