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STOCKHOLDERS' EQUITY | 6 Months Ended
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Jun. 30, 2024
Equity [Abstract] |
STOCKHOLDERS' EQUITY | STOCKHOLDERS' EQUITY Common Stock In April 2024, the Company entered into a Securities Purchase Agreement with Johnson & Johnson Innovation – JJDC, Inc. ("JJDC"), pursuant to which the Company sold to JJDC, in an unregistered offering, 3,636,363 shares of its common stock, at a price of $1.82 per share, which represents a 10% premium on the Company’s closing stock price on April 9, 2024, for aggregate gross proceeds of approximately $6.6 million, before deducting offering expenses. The Company had 200,000,000 shares of common stock authorized as of June 30, 2024 and December 31, 2023, of which 41,487,586 and 37,829,565 shares were issued and outstanding as of June 30, 2024 and December 31, 2023, respectively. Preferred Stock The Company had 50,000,000 shares of preferred stock authorized as of June 30, 2024 and December 31, 2023, of which no shares were outstanding as of June 30, 2024 and December 31, 2023. Pre-Funded Warrants In connection with the November 2022 follow-on offering, the Company entered into an agreement with certain investors for pre-funded warrants in lieu of common stock to purchase up to an aggregate of 3,333,388 shares of common stock at a price of $5.9999, which represents the per share public offering price at the November 2022 follow-on offering for common stock less a $0.0001 per share exercise price for each pre-funded warrant. The Company may not effect the exercise of any pre-funded warrant, and a holder will not be entitled to exercise any portion of any pre-funded warrant if, upon giving effect to such exercise, the aggregate number of shares of common stock beneficially owned by the holder (together with its affiliates) would exceed 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, which percentage may be increased or decreased at the holder’s election upon 61 days’ notice to the Company subject to the terms of such pre-funded warrants, provided that such percentage may in no event exceed 19.99%. The Company's pre-funded warrant is a freestanding instrument that does not meet the definition of a liability pursuant to ASC 480, Distinguishing Liabilities from Equity, and does not meet the definition of a derivative pursuant to ASC 815, Derivatives and Hedging. The pre-funded warrant is indexed to the Company’s common stock and meets all other conditions for equity classification under ASC 480 and ASC 815. Accordingly, the pre-funded warrant was classified as equity and accounted for as a component of additional paid-in capital at the time of issuance. All of the pre-funded warrants related to our November 2022 follow-on offering remain outstanding and unexercised as of June 30, 2024. Share-based Compensation Share-based compensation expense is comprised of the Company's stock options, restricted stock awards, restricted stock units and shares issued pursuant to the employee stock purchase plan, and is classified in the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2024 and 2023 as follows:
| FOR THE THREE MONTHS ENDED JUNE 30, |  | FOR THE SIX MONTHS ENDED JUNE 30, |  |
(in thousands) | 2024 |  | 2023 |  | 2024 |  | 2023 |  |  |  |
Research and development | $ | 772 |  |  | $ | 1,180 |  |  | $ | 1,541 |  |  | $ | 2,243 |  |  |  |  |
General and administrative | 1,143 |  |  | 1,512 |  |  | 2,462 |  |  | 3,494 |  |  |  |  |
| $ | 1,915 |  |  | $ | 2,692 |  |  | $ | 4,003 |  |  | $ | 5,737 |  |  |  |  |
2021 Equity Incentive Plan In 2021, the board of directors adopted the Rallybio Corporation 2021 Equity Incentive Plan (the "2021 Plan"). The 2021 Plan initially reserved 5,440,344 shares of the Company's common stock that have been issued in respect of outstanding equity awards granted prior to the Company’s initial public offering ("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 until 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, 2024 and January 1, 2023, the 2021 Plan share pool was automatically increased by 1,891,478 and 1,891,868 shares, respectively. As of June 30, 2024, the total number of shares of common stock that were issuable under the 2021 Plan was 8,683,135 shares, of which 3,454,623 shares remained available for future issuance. The following table summarizes stock option activity for the six months ended June 30, 2024:
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, 2023 |  | 4,270,544 |  | $ | 9.98 |  |  | 8.5 |  | $ | — |
Granted |  | 1,119,039 |  | $ | 1.89 |  |  |  |  |
Forfeited |  | (556,235) |  | $ | 9.62 |  |  |  |  |
Expired |  | (17,801) |  | $ | 12.54 |  |  |  |  |
Exercised |  | — |  | $ | — |  |  |  |  |
Outstanding at June 30, 2024 |  | 4,815,547 |  | $ | 8.13 |  |  | 7.6 |  | $ | — |
Options exercisable at June 30, 2024 |  | 2,299,367 |  | $ | 10.38 |  |  | 6.4 |  | $ | — |
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, 2024 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, 2024 and 2023 was $1.47 per share and $4.93 per share, respectively. As of June 30, 2024, there was unrecognized share-based compensation expense related to unvested stock options of $11.1 million which the Company expects to recognize over a weighted-average period of approximately 2.4 years. The fair value of the stock options granted during the six months ended June 30, 2024 and 2023 was determined using the Black-Scholes option pricing model with the following assumptions:
|  | FOR THE SIX MONTHS ENDED JUNE 30,
|  | 2024 |  | 2023
Expected volatility |  | 89.41% - 94.48% |  | 89.14% - 92.27%
Expected term (years) |  | 5.50 - 6.02 |  | 5.50 - 6.08
Risk free interest rate |  | 3.93% - 4.35% |  | 3.58% - 4.52%
Expected dividend yield |  | — |  |  | — |
Exercise price |  | $1.86 - $2.40 |  | $5.38 - $7.83
A summary of the status of the Company's unvested restricted common stock awards at June 30, 2024 and changes during the six months ended June 30, 2024 was as follows:
Restricted Stock Awards |  | Shares |  | Weighted-Average Grant Date Fair Value Per Share
Unvested restricted stock awards at December 31, 2023 |  | 354,394 |  | $ | 4.10 |
Granted |  | — |  | $ | — |
Vested |  | (179,858) |  | $ | 3.45 |
Forfeited |  | (18,556) |  | $ | 16.03 |
Outstanding unvested restricted stock awards at June 30, 2024 |  | 155,980 |  | $ | 3.43 |
As of June 30, 2024, there was unrecognized share-based compensation expense related to unvested restricted stock awards of $0.5 million, which the Company expects to recognize over a weighted-average period of approximately 0.7 years. A summary of the status of the Company's unvested restricted common stock units at June 30, 2024 and changes during the six months ended June 30, 2024 was as follows:
Restricted Stock Units |  | Shares |  | Weighted-Average Grant Date Fair Value Per Share
Unvested restricted stock units at December 31, 2023 |  | 220,250 |  | $ | 8.55 |
Granted |  | 295,980 |  | $ | 1.83 |
Forfeited |  | (101,340) |  | $ | 7.60 |
Vested |  | (1,925) |  | $ | 7.68 |
Outstanding unvested restricted stock units at June 30, 2024 |  | 412,965 |  | $ | 3.97 |
As of June 30, 2024, there was unrecognized share-based compensation expense related to unvested restricted stock units of $0.9 million, which the Company expects to recognize over a weighted-average period of approximately 2.9 years. 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 initially reserved 291,324 shares of the Company's common stock for future issuances. The share pool will automatically increase on January 1st of each year until 2031, by the lesser of (i) one percent of the number of shares of the Company's common stock outstanding as of such date, (ii) 582,648 shares of the Company’s common stock and (iii) the number of shares of the Company's common stock determined by the board of directors on or prior to such date. The 2021 ESPP share pool did not increase on January 1, 2024. On January 1, 2023, the 2021 ESPP share pool was automatically increased by 378,373 shares. As of June 30, 2024, the total number of shares of the Company's common stock that was available for future issuance under the 2021 ESPP was 834,589 shares. During the six months ended June 30, 2024 and 2023, the Company issued 38,289 shares and 43,423 shares, respectively, under the 2021 ESPP. The 2021 ESPP allows eligible participants to purchase shares of our common stock through authorized payroll deductions. Pursuant to the 2021 ESPP, the purchase price of the shares will be 85% of the lower of the fair market value of our common stock on the date on which the relevant option was (i) granted and (ii) deemed exercised. For the three and six months ended June 30, 2024, the total share-based compensation for the 2021 ESPP was $12 thousand and $54 thousand, respectively, and $60 thousand and $122 thousand for the three and six months ended June 30, 2023, respectively.

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