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STOCK-BASED COMPENSATION | 3 Months Ended
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Mar. 31, 2022
STOCK-BASED COMPENSATION [Abstract] |
STOCK-BASED COMPENSATION |
9) | STOCK-BASED COMPENSATION
Stock Options There were no stock options outstanding or granted during the three months ended March 31, 2021. The following weighted-average assumptions were used for stock options granted during the three months ended March 31, 2022:
|  | Three months ended March 31, 2022 |
Weighted average risk-free rate |  |  | 1.92 | %
Weighted average volatility |  |  | 93 | %
Dividend yield |  |  | 0 | %
Expected term |  |  | 5.78 years |
The following table summarizes stock option activity for the three months ended March 31, 2022:
|  | Outstanding Options |  |  | Weighted Average Exercise Price per Share |  |  | Weighted Average Remaining Contractual Life (in years) |  |  | Aggregate Intrinsic Value |
Outstanding January 1, 2022 |  |  | 3,988,000 |  |  | $ | 8.40 |  |  |  | 9.38 |  |  | $ | - |
Granted |  |  | 1,258,000 |  |  |  | 2.10 |  |  |  | - |  |  |  | - |
Cancelled |  |  | (67,000 | ) |  |  | 5.94 |  |  |  | - |  |  |  |  |
Outstanding March 31, 2022 |  |  | 5,179,000 |  |  | $ | 6.90 |  |  |  | 9.32 |  |  | $ | 134,000 |
Options vested and exercisable at March 31, 2022 |  |  | 10,000 |  |  | $ | 10.26 |  |  |  | 9.75 |  |  | $ | - |
The per-share weighted average grant-date fair value of stock options granted during the three months ended March 31, 2022 was $1.58. As of March 31, 2022, the unamortized stock-based compensation expense related to outstanding unvested options was approximately $18.5 million with a weighted average remaining requisite service period of 3.06 years. The Company expects to amortize this expense over the remaining requisite service period of these stock options. Included in the 5,179,000 stock options outstanding as of March 31, 2022 are two stock option grants the Company awarded to Howard J. Federoff, M.D., Ph.D. upon his appointment as the Company’s Chief Executive Officer and President in April 2021. Dr. Federoff was granted a nonqualified stock option covering approximately 2,628,000 shares of common stock (the “Time-Based Option”). The Time-Based Option was granted at a per share exercise price equal to the closing price of the common stock on the NYSE American stock exchange on the date of grant. Of the shares covered by the Time-Based Option, 25% will vest on the one-year anniversary of the grant date, and the remaining shares will vest in substantially 36 equal monthly installments thereafter, so long as Dr. Federoff provides continuous service to the Company throughout the relevant vesting date. Dr. Federoff was also granted a performance-based nonqualified stock option covering approximately 597,000 shares of common stock (the “Milestone Option”). The Milestone Option was granted at a per share exercise price equal to the closing price of common stock on the NYSE American stock exchange on the date of grant, and its fair value is $4.3 million. The Milestone Option will fully vest upon the first concurrence by the U.S. Food and Drug Administration that a proposed investigation may proceed following review of a Company filed investigational new drug application in connection with that the License Agreement. This milestone is subject to Dr. Federoff’s continuous service with the Company through such vesting date. As of March 31, 2022, the Company has not recognized any stock-based compensation expense on the Milestone Option because the Company has determined that it is not yet probable that the performance milestone will be accomplished. Both the Time-Based Option and the Milestone Option were granted outside the Company’s equity incentive plans discussed above. The unvested portion of the Time-Based Option and the Milestone Option will be cancelled upon the termination of Dr. Federoff’s employment with the Company for any reason, subject to certain vesting acceleration provisions upon a qualifying termination, as described in his employment agreement with the Company. Unless earlier terminated in accordance with their terms, each of the Time-Based Option and the Milestone Option will otherwise expire on the tenth anniversary of their respective grant date and be subject to the terms and conditions of the respective option agreement approved by the Company. Each of the Time-Based Option and the Milestone Option was intended to constitute an “employment inducement grant” in accordance with the employment inducement grant rules set forth in Section 711(a) of the NYSE American LLC Company Guide and was offered as an inducement material to Dr. Federoff in connection with his hiring. There were no options exercised during the three months ended March 31, 2022 and 2021. RSUs Outstanding RSUs are settled in an equal number of shares of common stock on the vesting date of the award. An RSU award is settled only to the extent vested. Vesting generally requires the continued employment or service by the award recipient through the respective vesting date. Because RSUs are settled in an equal number of shares of common stock without any offsetting payment by the recipient, the measurement of cost is based on the quoted market price of the stock at the measurement date, which is the grant date. There were no RSUs outstanding or granted during the three months ended March 31, 2021. The following table summarizes RSU activity for the three months ended March 31, 2022:
|  | Outstanding Restricted Stock Units |  |  | Weighted Average Fair Value per Share |
January 1, 2022 |  |  | 240,000 |  |  | $ | 13.80 |
Granted |  |  | 1,101,000 |  |  |  | 1.93 |
Released |  |  | (9,000 | ) |  |  | 4.21 |
Cancelled |  |  | (9,000 | ) |  |  | 4.21 |
March 31 2022 |  |  | 1,323,000 |  |  | $ | 4.05 |
Balance expected to vest at March 31, 2022 |  |  | 772,000 |  |  |  |  |
During the three months ended March 31, 2022, the Company issued approximately 1,101,000 performance based RSUs (the “2022 PSUs”) to its employees, of which approximately 414,000 were awarded to Dr. Federoff. The 2022 PSUs are subject to the achievement of four performance goals, which are weighted equally. Once a performance goal is achieved, the tranche of shares allocated to that performance goal will be earned and will begin to vest over a three-year annual basis beginning on the date the performance goal was achieved. If a performance goal is not achieved, the tranche of shares allocated to that performance goal will be unearned and forfeited. The Company recognizes the fair value of RSUs granted as expense on a straight-line basis over the requisite service period. For performance based RSUs, the Company will begin recognizing the expense once the achievement of the related performance goal is probable. As of March 31, 2022, the unamortized stock-based compensation expense related to outstanding RSUs, including performance based RSUs that have been deemed probable, was approximately $3.6 million with a weighted average remaining requisite service period of 2.59 years. The Company expects to amortize this expense over the remaining requisite service period of the RSUs. Restricted Stock Pursuant to the Merger, Brooklyn LLC’s approximately 3,000 outstanding restricted common units were exchanged for approximately 630,000 shares of Brooklyn’s restricted common stock. There were no changes to any conditions and requirements of the restricted common stock. The shares vest quarterly beginning on March 31, 2021 and continuing through December 31, 2022, contingent on continued service. Due to the modification of the restricted common units, the fair value of the restricted common stock immediately after the Merger was compared to the fair value of the restricted common units immediately prior to the Merger, and the change in fair value of $0.3 million was recognized in the statement of operations during the three months ended March 31, 2021. The Company recognizes the fair value of restricted common stock as an expense on a straight-line basis over the requisite service period. During the quarter ended March 31, 2022, approximately 78,000 shares of unvested restricted common stock were forfeited due to the holders of such shares no longer providing services to the Company. As of March 31, 2022, there were no shares of unvested restricted stock outstanding. Stock-Based Compensation Expense Stock-based compensation is recorded in general and administrative expense and research and development expense in the statement of operations. For the three months ended March 31, 2022 and 2021, stock-based compensation expense recorded in general and administrative expense was $0.8 million and $17,000, respectively. For both of the three months ended March 31, 2022 and 2021, stock-based compensation expense recorded in research and development expense was $0.4 million.

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