Stock-Based Compensation

9 Months Ended

Sep. 30, 2025

Share-Based Payment Arrangement [Abstract]

8. Stock-Based Compensation

Equity Plans

In May 2021 the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan”). As amended and restated in February 2025, the 2021 Plan has an aggregate of 3,340,000 authorized shares.

The 2021 Plan provides for the grant of incentive stock options (“ISOs”), non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, other forms of equity compensation and performance cash awards. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to non-employee directors and consultants of the Company and its affiliates. Service-based awards generally vest over a four-year period, with the first 25% of such awards vesting following twelve months of continued employment or service with the remaining awards vesting monthly in equal installments over the following thirty-six months. Certain other awards vest monthly over thirty-six months for subsequent grants. For certain service-based awards to the board of directors, vesting occurs in thirty-six equal monthly installments over a three-year period for initial grants and in twelve equal monthly installments over a twelve-month period for subsequent grants. As of September 30, 2025, there were 909,506 shares available for issuance under the 2021 Plan.

On July 26, 2020, the Company adopted the 2020 Inducement Equity Incentive Plan (the “2020 Inducement Plan”) and reserved 20,000 shares for future grant under the 2020 Inducement Plan. The 2020 Inducement Plan, as amended and restated in September 2025, has an aggregate of 1,080,000 authorized shares. As of September 30, 2025, there were 891,200 shares available for issuance under the 2020 Inducement Plan.

Stock Options

The risk-free interest rate valuation assumption for options is based on the U.S. Treasury yield curve rate at the date of grant with a maturity approximating the expected term of the option.

All option awards generally expire ten years from the date of grant. The expected term assumption for options granted to employees is determined using the simplified method that represents the average of the contractual term of the option and the weighted average vesting period of the option. The Company uses the simplified method because it does not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate the expected term.

During 2024, the expected volatility assumption utilized a weighted approach by blending the Company’s own historical price data with the historical volatility of a group of similar companies in the life sciences industry whose shares are publicly traded. The Company selected the peer group based on comparable characteristics, including development stage, product pipeline, and market capitalization. Effective January 1, 2025, the Company elected to remove peer group companies and determined its expected volatility assumption based solely on the volatility of the Company’s historical share prices using the closing share price beginning on June 15, 2020 and through the current period.

The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future.

The weighted average grant-date fair value of stock options granted in the three and nine months ended September 30, 2025 was $12.61 and $6.67, respectively. The weighted average grant-date fair value of stock options granted in the three and nine months ended September 30, 2024 was $6.49 and $14.25, respectively.

The weighted-average assumptions used to value these stock options using the Black-Scholes option-pricing model were as follows.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2025			2024			2025			2024
Risk-free interest rate		3.84	%		3.66	%		4.06	%		4.08	%
Dividend yield		0.00	%		0.00	%		0.00	%		0.00	%
Expected term of options (years)		6.08			5.38			5.82			5.98
Volatility		118.13	%		109.93	%		117.23	%		110.15	%

The table below summarizes the stock option activity during the nine months ended September 30, 2025:


	Number of Shares Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Balances at December 31, 2024		212,501		$	103.51		7.82	$	760
Granted		2,465,000		$	7.75		-		-
Exercised		(2,000	)	$	8.60		-		-
Cancelled/Forfeited		(93,598	)	$	24.16		-		-
Balances at September 30, 2025		2,581,903		$	15.04	9.33		$	17,411
Vested and expected to vest at September 30, 2025		2,581,903		$	15.04	9.33		$	17,411
Exercisable at September 30, 2025		559,974		$	39.45	8.96		$	3,492

The aggregate intrinsic value of options as of September 30, 2025 is based on the Company’s closing stock price of $15.00 per share. The intrinsic value of the options exercised for the three and nine months ended September 30, 2025 was $6 thousand.

Restricted Stock Unit Awards

Restricted stock units vest over four years with one sixteenth of the restricted stock units vesting every quarter.

Restricted stock unit award transactions during the nine months ended September 30, 2025 were as follows:


				Weighted Avg
				Grant Date
	Shares			Fair Value
Outstanding at December 31, 2024		28,537		$	38.50
Granted		30,000		$	6.65
Forfeited/Cancelled		(2,400	)	$	25.75
Issued as Common Stock		(31,750	)	$	10.51
Outstanding at September 30, 2025		24,387		$	37.02

The aggregate fair value of RSUs vested during the nine months ended September 30, 2025 was $473 thousand.

2017 Employee Stock Purchase Plan

In May 2021, the Company's board of directors reactivated the Company’s 2017 Employee Stock Purchase Plan (“ESPP”) which had previously been suspended. The ESPP allows eligible employees to withhold up to 15% of their earnings to purchase shares of the Company’s common stock at a price per share equal to the lower of (i) 85% of the fair market value of a share of the Company’s common stock on the first date of an offering, or (ii) 85% of the fair market value of a share of the Company’s common stock on the date of purchase. The Company had 41,825 shares available for future issuance under the ESPP as of September 30, 2025. The number of shares of common stock reserved for issuance will automatically increase on January 1 of each calendar year through January 1, 2027, by the lesser of (a) 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, (b) 12,000 shares, or (c) a number determined by the Company's board of directors that is less than (a) and (b). The Company issued 1,658 and 958 shares under the ESPP during the nine months ended September 30, 2025 and 2024, respectively. The ESPP is considered a compensatory plan. The Company recorded stock-based compensation expense related to its ESPP of $28 thousand and $42 thousand for the three and nine months ended September 30, 2025, respectively, and $2 thousand and $6 thousand for the three and nine months ended September 30, 2024, respectively.

Stock-Based Compensation Expense

Stock-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2025 and 2024 is as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Research and development	$	414	$	270	$	1,201	$	878
General and administrative		1,065		521		3,393		1,520
Total	$	1,479	$	791	$	4,594	$	2,398

As of September 30, 2025, there was unrecognized stock-based compensation expense of $13.9 million related to stock options and restricted stock units with service conditions, which is expected to be recognized over a weighted-average period of 2.48 years. Total unrecognized stock-based compensation as of September 30, 2025 was approximately $0.5 million related to restricted stock units with performance-based vesting. The performance-based conditions are tied to development milestones which have not been met.

Forte Biosciences, Inc. 10-Q