Stockholders' Equity

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Stockholders' Equity

8. STOCKHOLDERS' EQUITY

In August 2021, the Company completed its IPO, pursuant to which it issued and sold 7,130,000 shares of the Company’s common stock, inclusive of 930,000 shares sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $13.00 per share. The gross proceeds from the IPO, including the exercise of the underwriter's option to purchase additional shares were $92.7 million and the net proceeds were approximately $83.0 million, after deducting underwriting discounts and commissions and other offering

costs.

A reorganization and liquidation of Rallybio Holdings, LLC was completed prior to the Company's IPO, which resulted in a change in reporting entity to Rallybio Corporation. In accordance with the applicable accounting guidance related to changes in reporting entities, the financial statements for all periods presented have been retrospectively adjusted giving effect to the reorganization and liquidation as applicable to all periods presented.

Preferred Stock—The Company had 50,000,000 shares of preferred stock authorized as of June 30, 2022 and December 31, 2021, respectively, of which no shares were outstanding as of June 30, 2022 and December 31, 2021.

Common Stock—The Company had 200,000,000 shares of common stock authorized as of June 30, 2022 and December 31, 2021, respectively, of which 32,130,970 and 32,129,970 shares were issued and outstanding as of June 30, 2022 and December 31, 2021.

Share-based Compensation—

2021 Equity Incentive Plan

In 2021, the board of directors adopted the Rallybio Corporation 2021 Equity Incentive Plan (the "2021 Plan"). The 2021 Plan reserves 5,440,344 for shares of the Company's common stock that have been issued in respect of outstanding equity awards granted prior to the registrant’s IPO and for future issuances of shares to employees, directors and consultants in the form of stock options, SARs, restricted and unrestricted stock and stock units, performance awards and other awards that are convertible into or otherwise based on the Company's common stock. Dividend equivalents may also be provided in connection with awards under the 2021 Plan. The share pool will automatically increase on January 1st of each year from 2022 to 2031 by the lesser of (i) five percent of the number of shares of the Company's common stock outstanding as of such date and (ii) the number of shares of the Company's common stock determined by the board of directors on or prior to such date. On January 1, 2022, the 2021 Plan share pool was automatically increased by 1,606,549 shares. As of June 30, 2022, the total number of shares of common stock that were issuable under the 2021 Plan was 4,659,970 shares, of which 1,826,218 shares remained available for future issuance.

2021 Employee Stock Purchase Plan

In connection with the Company's IPO, the board of directors adopted the Rallybio Corporation 2021 Employee Stock Purchase Plan, (the "2021 ESPP"), which reserves 291,324 shares of the Company's common stock for future issuances under this plan. The share pool will automatically increase on January 1st of each year from 2022 to 2031 by the lesser of (i) one percent of the number of shares of the Company's common stock outstanding as of such date and (ii) the number of shares of the Company's common stock determined by the board of directors on or prior to such date. In 2022 the 2021 ESPP share pool was automatically increased by 321,309 shares. During the six months ended June 30, 2022, there was no activity under the 2021 ESPP.

Share-based compensation for stock options, restricted stock awards and restricted stock units is classified in the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2022 and 2021 and was as follows:
 

	FOR THE THREE MONTHS ENDED JUNE 30,				FOR THE SIX MONTHS ENDED JUNE 30,
(in thousands)	2022		2021		2022		2021
Research and development	$	911	$	193	$	1,636	$	354
General and administrative		1,736		346		3,065		707
	$	2,647	$	539	$	4,701	$	1,061

The following table summarizes stock option activity for the six months ended June 30, 2022:
 

Stock Options	Number of Option Shares			Weighted-Average Exercise Price		Weighted-Average Contractual Term    (in years)		Aggregate Intrinsic Value    (in thousands)
Outstanding at December 31, 2021		1,357,784		$	12.72	9.7		$	—
Granted		1,392,995		$	13.70
Exercised		—		$	—
Forfeited		(4,027	)	$	10.38
Outstanding at June 30, 2022		2,746,752		$	13.22		9.4	$	—
Options exercisable at June 30, 2022		249,700		$	13.44		8.8	$	—

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the estimated fair value of the Company's common stock. Options outstanding and exercisable with an exercise price above the closing price as of June 30, 2022 are considered to have no intrinsic value. Using the Black-Scholes option pricing model, the weighted-average grant date fair value of stock options granted during the six months ended June 30, 2022 was $10.17 per share. There were no stock options granted during the six months ended June 30, 2021. Options vested during the six months ended June 30, 2022 with an exercise price above the closing price as of June 30, 2022 are considered to have no intrinsic value. As of June 30, 2022, there was unrecognized share-based compensation expense related to unvested stock options of $22.1 million, which the Company expects to recognize over a weighted-average period of approximately 3.3 years.
 

The fair value of the stock options granted during the six months ended June 30, 2022 was determined using the Black-Scholes option pricing model with the following assumptions:
 

	FOR THE SIX MONTHS ENDED JUNE 30,
	2022
Expected volatility	89.3% - 90.8%
Expected term (years)	5.50 - 6.08
Risk free interest rate	1.42% - 2.94%
Expected dividend yield		—
Exercise price	$7.68 - $15.04

A summary of the status of the Company's nonvested restricted common stock awards at June 30, 2022 and changes during the six months ended June 30, 2022 was as follows:

Restricted Stock Awards	Shares			Weighted Average Grant Date Fair Value Per Share
Nonvested restricted stock awards at December 31, 2021		2,272,707		$	3.22
Shares granted		—		$	—
Shares vested		(810,881	)	$	2.99
Outstanding nonvested restricted stock awards at June 30, 2022		1,461,826		$	3.35

As of June 30, 2022, there was unrecognized share-based compensation expense related to unvested restricted stock awards of $4.7 million, which the Company expects to recognize over a weighted-average period of approximately 2.6 years.

A summary of the status of the Company's nonvested restricted common stock units at June 30, 2022 and changes during the six months ended June 30, 2022 was as follows:

Restricted Stock Units	Shares			Weighted Average Grant Date Fair Value Per Share
Nonvested restricted stock units at December 31, 2021		2,000		$	10.76
Shares granted		86,000		$	14.38
Shares vested		(1,000	)	$	10.76
Outstanding nonvested restricted stock units at June 30, 2022		87,000		$	14.34

As of June 30, 2022, there was unrecognized share-based compensation expense related to unvested restricted stock units of $1.1 million, which the Company expects to recognize over a weighted-average period of approximately 2.7 years.