Stock-Based Compensation

9 Months Ended

Sep. 30, 2023

Stock-Based Compensation

Stock-Based Compensation

10. Stock-Based Compensation

2016 Omnibus Incentive Plan

Prior to the Merger, NeuroRx maintained its 2016 Omnibus Incentive Plan (the “2016 Plan”), under which NeuroRx granted incentive stock options, restricted stock awards, other stock-based awards, or other cash-based awards to employees, directors, and non-employee consultants. The maximum aggregate shares of common stock that were subject to awards and issuable under the 2016 Plan was 3,472,000.

In connection with the Merger, each option of NeuroRx that was outstanding and unexercised immediately prior to the Effective Time (whether vested or unvested) was assumed by BRPA and converted into an option to acquire an adjusted number of shares of Common Stock at an adjusted exercise price per share (the “Substitute Options”), based on the Exchange Ratio (of 3.16).

Upon the closing of the Merger, the outstanding and unexercised NeuroRx stock options became options to purchase an aggregate 2,895,423 shares of the Company’s Common Stock at an average exercise price of $5.10 per share.

2021 Omnibus Incentive Plan

As of September 30, 2023, 6,713,608 shares of Common Stock are authorized for issuance pursuant to awards under the Company’s 2021 Omnibus Incentive Plan (the “2021 Plan”). As of January 1, 2023, 664,430 shares were added to the 2021 Plan under an evergreen feature that automatically increases the reserve with additional shares of Common Stock for future issuance under the Incentive Plan each calendar year, beginning January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (A) 1% of the shares of Common Stock outstanding on the final day of the immediately preceding calendar year or (B) a smaller number of shares determined by the Board. As of September 30, 2023, 5,749,394 shares have been awarded and 964,214 shares remain available for issuance under the 2021 Plan. The 2021 Plan permits the granting of incentive stock options, restricted stock awards, other stock-based award or other cash-based awards to employees, directors, and non-employee consultants.

Option Awards

The fair value of each employee and non-employee stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company is a public company and has limited company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the limited company-specific historical volatility and implied volatility as well as historical volatility of a publicly traded set of peer companies. The expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Additionally, certain options granted contain terms that require all unvested options to immediately vest a) upon the approval of a New Drug Application (NDA) by the FDA for NRX-101, or b) immediately preceding a change in control of the Company, whichever occurs first.

The grant date fair value of employee and non-employee stock option awards is determined using the Black Scholes option-pricing model. The Company did not grant any stock options during the three or nine months ended September 30, 2023.

The following assumptions were used for the year ended December 31, 2022:

	December 31, 2022
Exercise price		$0.51-$3.10
Risk-free rate of interest		1.8%-4.36%
Expected term (years)		5.3-6.5
Expected stock price volatility		94.9%-147.8%
Dividend yield		—

The following table summarizes the Company’s employee and non-employee stock option activity under the Plan for the following periods:

	Number of shares	Weighted average exercise price	Weighted average remaining contractual life (in years)	Aggregate intrinsic value (in thousands)
Outstanding as of December 31, 2022	2,548,849	$ 3.32	8.4	$ 618
Outstanding as of September 30, 2023	2,548,849	$ 3.32	7.6	$ 10
Options vested and exercisable as of September 30, 2023	2,022,085	$ 3.68	7.3	$ 10

The weighted average grant date fair value per share for employee stock and non-employee option grants during the three and nine months ended September 30, 2022 was $0.64 and $1.55, respectively. At September 30, 2023, the total unrecognized compensation related to unvested employee and non-employee stock option awards granted, was $0.8 million, which the Company expects to recognize over a weighted-average period of approximately 0.6 years.

The following table summarizes the Company’s recognition of stock-based compensation for the following periods (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Stock-based compensation expense
General and administrative	$	261	$	506	$	1,295	$	2,390
Research and development		90		35		295		472
Total stock-based compensation expense	$	351	$	541	$	1,590	$	2,862

Restricted Stock Awards

The following table presents the Company’s Restricted Stock Activity:

	Awards	Weighted Average Grant Date Fair Value
Balance as of December 31, 2022	1,000,000	$ 0.57
Vested	333,333	-
Balance as of September 30, 2023	666,667	$ 0.57

As of September 30, 2023, total unrecognized compensation expense related to RSAs granted was approximately $0.3 million, which is expected to be recognized over a weighted-average period of approximately 1.8 years.

Stock-based compensation expense related to RSAs was approximately less than $0.1 million and $0.2 million during the three and nine months ended September 30, 2023.