Stock-Based Compensation

PMI grants equity awards primarily through the Company’s 2025 Equity Incentive Plan (the “2025 Plan”), which was approved by the Board on April 7, 2025, and was approved by a majority of the Company’s stockholders on April 25, 2025. As a result of the Board and stockholders’ respective approvals, the Company’s 2015 Equity Incentive Plan (as amended, the “2015 Plan”) was terminated, replaced and superseded by the 2025 Plan, except that any grants awarded under the 2015 Plan will remain in effect pursuant to their terms.

The 2025 Plan provides for grants in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, and unrestricted stock. The maximum number of shares of common stock which may be issued under the 2025 Plan as of the date of the Board’s approval is 6,344,184 shares of common stock, plus any shares of common stock returned to the 2025 Plan (which, together with the 6,344,184 shares, may not exceed 91,417,252 shares of common stock). Under the 2025 Plan, incentive stock options may be granted solely to the Company’s employees, including its officers. Awards other than incentive stock options may be granted to the Company’s directors, consultants or employees, including its officers. The 2025 Plan is administered by the Board, which in turn has delegated authority to administer the plans to the Compensation Committee of the Board. The 2025 Plan will remain in effect through April 7, 2035, unless sooner terminated under the terms of the 2025 Plan.

Stock Option Activity

Stock option activity under the 2015 Plan and 2025 Plan is summarized for the six months ended June 30, 2026 below:


	Options Issued and Outstanding	Weighted Average Exercise Price
Balance as of January 1, 2026	76,886,581	$	0.17
Options granted	4,243,880	$	0.71
Options exercised	(1,229,353)	$	0.03
Options forfeited	(2,661,316)	$	0.37
Options expired	(3,800,533)	$	0.02
Balance as of June 30, 2026	73,439,259	$	0.21
Options vested and expected to vest as of June 30, 2026	70,717,063	$	0.21
Options vested and exercisable as of June 30, 2026	64,342,024	$	0.15

Other Information Regarding Stock Options

The weighted-average remaining contractual term for options outstanding as of June 30, 2026 is 3.89 years.

The fair value of options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for stock-based compensation expense requires PMI to make assumptions and judgments about the variables used in the calculation, including the fair value of PMI’s common stock, the expected term (the period of time that the options granted are expected to be outstanding), the volatility of PMI’s common stock, a risk-free interest rate, and expected dividends. Given the absence of a publicly traded market, the Company considered numerous objective and subjective factors to determine the fair value of PMI’s common stock at each grant date. These factors included, but were not limited to: (i) contemporaneous valuations of common stock performed by unrelated third-party specialists, (ii) the prices for PMI’s preferred stock sold to outside investors, (iii) the rights, preferences and privileges of PMI’s preferred stock relative to PMI’s common stock, (iv) the lack of marketability of PMI’s common stock, (v) developments in the business, (vi) secondary transactions of PMI’s common and preferred shares, and (vii) the likelihood of achieving a liquidity event, such as an initial public offering or a merger or acquisition of Prosper, given prevailing market conditions. As PMI’s stock is not publicly traded, volatility for stock options is based on an average of the historical volatilities of the common stock of several entities with characteristics similar to those of PMI. The expected term assumptions were determined based on the vesting terms, exercise terms and contractual lives of the options using the simplified method. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. PMI uses an expected dividend yield of zero as it does not anticipate paying any dividends in the foreseeable future.

PMI also estimates forfeitures of unvested stock options. Expected forfeitures are based on the Company’s historical experience. To the extent actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. No compensation cost is recorded for options that do not vest.

The fair values of PMI’s stock option awards granted were estimated at the dates of grant using the Black-Scholes model with the following average assumptions for the periods presented:


	Three Months Ended June 30,			Six Months Ended June 30,
	2026		2025	2026		2025
Volatility of common stock	60.00	%	n/a	62.62	%	65.42	%
Risk-free interest rate	4.14	%	n/a	4.03	%	4.03	%
Expected life (in years)	5.8 years		n/a	5.9 years		6.0 years
Dividend yield	—	%	n/a	—	%	—	%

Restricted Stock Unit Activity

PMI grants RSUs to certain employees that are subject to three-year or four-year vesting terms and the occurrence of a liquidity event. The following table summarizes the Company’s RSU activity for six months ended June 30, 2026:


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested as of January 1, 2026	2,559,633	$	1.03
Granted	3,618,453	0.42
Unvested as of June 30, 2026	6,178,086	$	0.67

Share Based Compensation

The following table presents the amount of stock-based compensation related to stock-based awards granted to employees recognized in Prosper’s condensed consolidated statements of operations for the periods presented (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
Origination and servicing	$	47	$	27	$	149	$	55
Sales and marketing	18		18		33		35
General and administrative	266		304		613		586
Total stock-based compensation	$	331	$	349	$	795	$	676

As of June 30, 2026, the unamortized stock-based compensation expense, adjusted for forfeiture estimates, related to unvested stock-based awards was approximately $1.9 million, which will be recognized over a remaining weighted-average vesting period of approximately 2.8 years.