10. Stock-Based Compensation

The Company uses equity-based compensation programs to provide long-term performance incentives for its employees, directors and consultants. These incentives consist primarily of stock options and restricted stock grants.

In January 2017, the Company’s Board of Directors approved the LB Pharmaceuticals Inc 2017 Stock Incentive Plan (“2017 Plan”). No additional shares will be issued under the 2017 Plan. As of December 31, 2025 and 2024, there were 2,150 and 10,397 shares outstanding, respectively.

In 2018, the Company’s Board of Directors approved the LB Pharmaceuticals Inc 2018 Stock Incentive Plan (“2018 Plan”). No additional awards will be granted under the 2018 Plan. As of December 31, 2025 and 2024, there were 20,234 and 27,943 shares outstanding, respectively.

In August 2023, the Company’s Board of Directors approved the LB Pharmaceuticals Inc 2023 Stock Incentive Plan (“2023 Plan”). The 2023 Plan authorized the issuance of stock options or restricted stock up to 288,847 shares of the Company’s common stock. In December 2024, the Company amended the 2023 Plan increasing the maximum aggregate number of shares that may be issued under the 2023 Plan to 464,553. No additional shares will be issued under the 2023 Plan. As of December 31, 2025 and 2024, there were 397,385 and 457,138 shares outstanding under the 2023 Plan, respectively.

In September 2025, the Company’s stockholders approved the LB Pharmaceuticals Inc 2025 Equity Incentive Plan (“2025 Plan”). The 2025 Plan authorized the issuance of stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and performance awards. Initially, the maximum number of shares issuable under the 2025 Plan is 2,907,335 shares. In addition, the number of shares reserved for issuance under the 2025 will increase on January 1 of each calendar year, starting on January 1, 2026 through January 1, 2035, in an amount equal to 5% of the total number of fully diluted shares on the last day of the year prior to the date of the automatic increase, or a lesser amount as determined by the board of directors. The maximum number of shares of common stock that may be issued on the exercise incentive stock options under the 2025 Plan is 8,722,005. As of December 31, 2025, there were 1,882,871 shares outstanding under the 2025 Plan. As of December 31, 2025, 605,412 shares are available for future issuance under the 2025 Plan.

Issuances Outside of Equity Plans

During the year ended December 31, 2025, the Company granted employees 285,000 stock options as an inducement material to the acceptance of an offer of employment in accordance with Nasdaq Listing Rule 5635(c)(4). The Company intends to file a registration statement on Form S-8 to register the shares of common stock underlying the inducement awards.

Stock Options

Stock options vest based on one of the following schedules: (i) 25% on the first anniversary of grant date with the remaining 75% to vest in 36 equal monthly installments thereafter through the fourth anniversary of the grant date; (ii) 100% vesting in 36 equal monthly installments through the third anniversary of the grant date; or (iii) 100% vesting in 12 equal monthly installments through the first anniversary of the grant date for certain nonemployee grants. All stock options expire ten years from the grant date. The assumptions used to determine the fair value of stock options granted to employees and non-employees for the years ended December 31, 2025 and 2024 were as follows:

The weighted average grant date fair value of the stock options granted during the year ended December 31, 2025 was $11.42. The weighted average grant date fair value of the stock options granted during the year ended December 31, 2024 was $31.23.

As of December 31, 2025, there was $29.1 million unrecognized stock-based compensation expense which is expected to be recognized over a weighted average period of 3.56 years.

As of December 31, 2024, the Company’s former chief executive officer (the “Former CEO”) entered into a transition, consulting, and separation agreement (“Separation Agreement”) with the Company including continued consulting services (see Note 11 Restructuring). Pursuant to the original terms of the stock option awards, the outstanding stock options continue to vest as long as services are provided to the Company under the Separation Agreement as a non-employee consultant. In accordance with ASC 718, there was a modification of the Former CEO’s options related to a reduction in the level of required service. The consulting services outlined in the Separation Agreement are not substantive.

As a result, the Company determined the fair market value of all awards expected to vest over the duration of the Separation Agreement as of the modification date using the Black-Scholes option pricing model. The total amount of $1.7 million was recognized immediately.

In connection with a reduction in force ("RIF") initiated in May 2025, the Company modified stock option awards granted to its former Chief Financial Officer ("Former CFO") and former Chief Scientific Officer ("Former CSO"). These modifications involve the acceleration of service-based vesting conditions and were accounted for as Type III modifications (improbable-to-probable vesting) in accordance with ASC 718. During the year ended December 31, 2025, the Company recognized a reduction of $0.2 million in stock-based compensation expense included in general and administrative expense and an increase of less than $0.1 million included in research and development expense on the statement of operations.

In connection with the IPO in September 2025, the Company's board of directors approved the repricing of stock options previously granted to current executive officers, employees and directors with per-share exercise prices above the initial per share to the public price in the offering, or the Option Repricing. Based on the initial price per share to the public of $15.00 per share, on September 10, 2025, stock options to purchase 406,998 shares of common stock were automatically repriced to an exercise price per share of $15.00. These modifications were accounted for as a Type I modification (probable-to-probable vesting) in accordance with ASC 718. During the year ended December 31, 2025, the Company recognized stock based compensation expense of $0.1 million in research and development expenses and $0.4 million in general and administrative expenses in the statements of operations. The Company will recognize an additional $1.1 million through February 2029.

There were no realized tax benefits for the years ended December 31, 2025 and 2024.

Restricted Stock

No restricted stock was granted during the years ended December 31, 2025 and 2024.

Restricted stock awards vest over the period in which the related services are rendered, which may range from immediate vesting to up to 36 months. Certain awards alternatively vest upon the consummation of the Company’s first underwritten public offering under the Securities Act of 1933, or on the six month anniversary of the public offering.

As of the closing of the IPO in September 2025, the Company recognized approximately $0.1 million for awards that vest upon the consummation of the Company’s first underwritten public offering under the Securities Act of 1933 or the six month anniversary of the IPO. Substantially all of the compensation expense related to these awards has been recognized as of December 31, 2025.