Alto Neuroscience, Inc.ANRO
Alto Neuroscience, Inc. Stock Compensation Disclosure
Stock Based Plans
2024 Equity Incentive Plan
In January 2024, the Board adopted, and the Company’s stockholders approved, the 2024 Equity Incentive Plan (the “2024 Plan”), which became effective on the execution of the underwriting agreement related to the IPO. Under the 2024 Plan, the Company may grant incentive stock options to employees, including employees of any parent or subsidiary, and nonstatutory stock options, stock appreciation rights, RSAs, RSUs, performance awards and other forms of stock awards to employees, directors, and consultants, including employees and consultants of the Company’s affiliates. The 2024 Plan is a successor to the 2019 Equity Incentive Plan, which was adopted by the Board of Directors in March 2019 (as amended, the “2019 Plan”). A total of 2,000,000 shares of common stock were approved to be initially reserved for issuance under the 2024 Plan. In addition, the number of shares of the Company’s common stock reserved for issuance under the 2024 Plan automatically increases on January 1 of each calendar year, starting on January 1, 2025 and continuing through and including January 1, 2034, in an amount equal to 5% of the total number of shares of the Company’s common stock
outstanding on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by the Board. On January 1, 2026 and 2025, the number of shares of common stock reserved for issuance under the 2024 Plan increased by 1,596,176 and 1,349,328 shares, respectively. Following effectiveness of the 2024 Plan, no further issuance may be made under the 2019 Plan.
As of December 31, 2025 and 2024, the total number of shares authorized to be issued under the 2024 Plan was 3,349,328 and 2,000,000, respectively. As of December 31, 2025 and 2024, there were 625,142 and 198 shares of common stock reserved and available for issuance under the 2024 Plan, respectively.
2025 Inducement Plan
On February 6, 2025, the Board adopted the 2025 Inducement Plan (the “Inducement Plan”), pursuant to which it reserved 500,000 shares of common stock for issuance to individuals who were not previously employees of the Company, or who are returning to employment following a bona fide period of non-employment with the Company, as an inducement material to such persons entering into employment with the Company, in accordance with New York Stock Exchange Listed Company Manual Rule 303A.08. Under the Inducement Plan, the Company has the ability to issue non-statutory stock options, stock appreciation rights, RSUs, RSAs, and performance awards. As of December 31, 2025, stock options to purchase 150,000 shares of common stock had been granted under the Inducement Plan.
Employee Stock Purchase Plan
In January 2024, the Board adopted, and the Company’s stockholders approved, the 2024 Employee Stock Purchase Plan (the “ESPP”), which became effective on the execution of the underwriting agreement related to the IPO. A total of 250,000 shares of common stock were approved to be initially reserved for issuance under the ESPP. In addition, the number of shares of common stock reserved for issuance under the ESPP will automatically increase on January 1 of each calendar year, beginning on January 1, 2025 and continuing through, and including, January 1, 2034, by the lesser of (1) 1% of the total number of shares of the Company’s common stock outstanding on the last day of the calendar month before the date of the automatic increase, and (2) 750,000 shares; provided, that before the date of any such increase, the Board may determine that such increase will be less than the amount set forth in clauses (1) and (2). On January 1, 2026 and 2025, the number of shares of common stock reserved for issuance under the ESPP increased by 319,235 and 269,865 shares, respectively. As of December 31, 2025, the Company had not opened the ESPP for enrollment, and therefore there were no purchases or share issuances during the periods covered by these financial statements.
Stock Option Repricing
In July 2025, the Board approved a stock option repricing, which was effective at the close of market on July 3, 2025 (“Repricing Effective Date”). The repricing generally applied to the outstanding stock options held by then current employees and consultants that had an exercise price greater than $2.35 per share. As of the Repricing Effective Date, the eligible stock options were immediately repriced such that the exercise price per share for such options was reduced to $2.35 (the closing price of the Company’s common stock on the New York Stock Exchange on the Repricing Effective Date), subject to certain retention requirements. The retention period is 12 months following the Repricing Effective Date and can be accelerated under certain conditions. If an eligible stock option is exercised prior to the end of the relevant retention period, the participant will be required to pay a premium exercise price equal to the original exercise price per share of such stock option. There were no changes to the number of shares underlying the eligible stock options or to the vesting schedules or expiration dates of the eligible stock options. There were 4,225,763 shares underlying the repriced stock options, which had then-current exercise prices ranging from $2.44 to $16.00 per share. An incremental $1.4 million of stock-based compensation expense will be recognized over the greater of the 12-month retention period or the remaining vesting period of the outstanding stock options. Stock options held by non-employee members of the Board were not eligible for the repricing. For the year ended December 31, 2025, the Company recognized $0.4 million of incremental stock-based compensation expense in connection with the stock option repricing. In addition, the Company has $1.0 million of unrecognized stock based compensation related to the stock option repricing which is expected to be recognized over a weighted-average period of 1.0 year.
Stock Options
The options have a 10-year life and generally vest over a period of four years, with the first 25% of the award vesting after one year and then monthly thereafter, subject to continuous service. Once the options are exercised, the shares are subject to transfer restrictions under the terms of the Company’s amended and restated certificate of incorporation.
The fair value of each option award is estimated using the Black-Scholes option-pricing model which involves the use of certain subjective assumptions. These assumptions and estimates are as follows:
Fair Value of Common Stock. As the Company’s common stock was not publicly traded prior to its IPO, the fair value was determined by the Board, with input from management and valuation reports prepared by independent third-party valuation firms. After the completion of the Company's IPO, the fair value of common stock is based on the closing price of the Company’s common stock on the New York Stock Exchange as reported on the date of the grant.
Risk-Free Interest Rate. The risk-free interest rate for the expected term of the options was based on the U.S. Treasury yield curve in effect at the time of the grant.
Expected Term. The expected term of options represents the period of time that options are expected to be outstanding. The Company’s historical stock option exercise experience does not provide a reasonable basis upon which to estimate an expected term due to a lack of sufficient data. The Company estimated the expected term by using the simplified method, using the average of the time-to-vesting and the contractual life of the options.
Expected Volatility. As the Company does not have sufficient trading history to estimate the volatility of its common stock, the expected volatility was estimated by taking the average historic price volatility for industry peers, consisting of several public companies in the Company’s industry which are either similar in size, stage of life cycle, or financial leverage, over a period equivalent to the expected term of the awards, where available.
Expected Dividend Yield. The Company has never declared or paid any cash dividends and do not presently plan to declare or pay cash dividends in the foreseeable future. As a result, an expected dividend yield of zero percent was used.
The weighted-average grant date fair value of options granted during 2025 and 2024 for awards subject only to service-based vesting conditions were $3.72 and $9.50 per share, respectively. Weighted-average grant date fair value assumptions were based on the following:
| 2025 | 2024 | ||||||||||
| Exercise price | $ | 4.95 | $ | 12.38 | |||||||
| Fair value of common stock | $ | 4.95 | $ | 12.38 | |||||||
| Expected term (in years) | 6.0 | 6.0 | |||||||||
| Volatility | 88.3 | % | 90.5 | % | |||||||
| Risk-free rate | 4.1 | % | 4.1 | % | |||||||
| Dividend yield | 0.0 | % | 0.0 | % | |||||||
The table below summarizes activity related to stock options subject only to service-based vesting conditions (in thousands, except per share amounts):
| Shares | Weighted- average exercise price per share (1) | Weighted – average remaining contractual term (in years) | Aggregate intrinsic value (1) | ||||||||||||||||||||
| Outstanding at December 31, 2023 | 2,880 | $ | 4.48 | 8.7 | $ | 7,794 | |||||||||||||||||
| Granted | 2,142 | 12.38 | |||||||||||||||||||||
| Exercised | (125) | 1.50 | 368 | ||||||||||||||||||||
| Forfeited and cancelled | (382) | 9.58 | |||||||||||||||||||||
| Outstanding at December 31, 2024 | 4,515 | 7.88 | 8.3 | 2,109 | |||||||||||||||||||
| Granted | 1,198 | 4.95 | |||||||||||||||||||||
| Exercised | (249) | 2.84 | 3,723 | ||||||||||||||||||||
| Forfeited and cancelled | (514) | 8.51 | |||||||||||||||||||||
| Outstanding at December 31, 2025 | 4,950 | $ | 7.28 | 7.9 | $ | 52,078 | |||||||||||||||||
| Exercisable at December 31, 2025 | 2,321 | $ | 6.95 | 7.1 | $ | 25,169 | |||||||||||||||||
| (1) Since the reporting period covered by the table above is before the expiration of the aforementioned retention period and any employees who exercised their repriced stock options during the reporting period, with certain exceptions, would have to pay the original exercise price, the weighted average exercise price and intrinsic value in the table above does not reflect the effect of repricing. | |||||||||||||||||||||||
As of December 31, 2025, there was approximately $14.5 million of unrecognized stock-based compensation expense related to these service-based unvested stock options, excluding the impact of the option repricing, which is expected to be recognized over a weighted-average period of 2.4 years.
Restricted Stock Units
The table below summarizes activity related to RSUs subject only to service-based vesting conditions (in thousands, except per share amounts):
| Shares | Weighted-average grant date fair value per share | ||||||||||
| Outstanding, December 31, 2023 | — | $ | — | ||||||||
Granted | 54 | 14.88 | |||||||||
Vested | — | — | |||||||||
Forfeited and cancelled | — | — | |||||||||
| Outstanding, December 31, 2024 | 54 | 14.88 | |||||||||
Granted | — | — | |||||||||
Vested | (27) | 14.88 | |||||||||
Forfeited and cancelled | — | — | |||||||||
| Outstanding, December 31, 2025 | 27 | $ | 14.88 | ||||||||
On March 1, 2024, the Company issued 53,864 RSUs under the 2024 Plan; 50% of the shares of common stock underlying the RSUs vest after 18 months and the remainder vest after 24 months from the grant date. The RSUs are subject only to a service-based vesting condition. Such shares are not accounted for as outstanding until they vest. As of December 31, 2025, the total unrecognized compensation related to unvested RSUs granted was $0.1 million which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 0.2 years. The fair value of the RSUs vested during the year ended December 31, 2025 was $0.1 million.
Performance Option Awards
The Board granted options to purchase common stock to certain employees and consultants that vest upon the achievement of certain performance conditions (“Performance Awards”) such as the completion of a future financing event or upon the achievement of defined clinical milestones or outcomes. The Company did not issue Performance Awards during the years ended December 31, 2025 or 2024.
During the year ended December 31, 2024, financing and clinical milestones were met, which resulted in the vesting of 194,835 Performance Awards and the recognition of $0.9 million of stock-based compensation expense. During the year ended December 31, 2025, there were 157,367 Performance Awards that were forfeited. As of December 31, 2025, there were 435,381 Performance Awards vested and outstanding, with a weighted average exercise price of $4.06 per share, of which no Performance awards remain unvested. The Performance Awards have a contractual term of 10 years. There is no unrecognized stock-based compensation expense related to Performance Awards.
Stock-based Compensation Expense
Non-cash stock-based compensation expense recognized in the accompanying consolidated statements of operations and comprehensive loss for the years ended December 31, 2025 and 2024 was as follows (in thousands):
| Years ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Research and development | $ | 4,103 | $ | 3,631 | |||||||
| General and administrative | 4,005 | 4,000 | |||||||||
| Total stock-based compensation expense | $ | 8,108 | $ | 7,631 | |||||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.