Share-Based Compensation

12 Months Ended

Dec. 31, 2022

Share-Based Compensation

Share-Based Compensation

8. Share-Based Compensation

Equity incentive plans were summarized as follows:

Stock incentive Plans 1	Issue Date Range	Total Stock & Options Authorized		Options Granted2		Options Remaining3		Stock Awards Granted		Stock Awards Remaining
2018 Employee Stock Option Plan4	9/26/18 – 9/26/28		66,666		63,333		0	0		0
2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan4	9/26/18 – 9/26/28		266,666		266,333		0	0		0
2021 Employee Stock Purchase Plan	5/16/22 – 5/16/32		50,000		0		0		0		50,000
2021 Stock Incentive Plan	5/16/22 – 5/16/32		1,618,639		0		0		1,333,332		285,306	5

¹ The Board of Directors has approved all stock, stock option and stock warrant issuances.

² As of December 31, 2022, there were 11,360 stock options that have been exercised, 36,666 stock options remain either vested or unvested, and an aggregate 285,306 stock options of the 333,333 total stock options authorized from the 2018 Employee Stock Option Plan and 2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan were forfeited.

³ Effective October 6, 2021, no further stock option issuance from 2018-ESOP and 2018-NQSOP as per provision in newly adopted 2021 Stock Incentive Plan.

⁴ On September 26, 2019, all qualified options under the 2018-ESOP became non-qualified options as a result of the 2018-ESOP not being ratified by the Company’s shareholders within one year of adoption.

⁵ An aggregate 285,306 stock options forfeited from the 2018 Employee Stock Option Plan and 2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan were applied to increase the 2021 Stock Incentive Plan, in accordance with the 2021 Stock Incentive Plan that was adopted by the Board of Directors on October 6, 2021.

2018 Employee Stock Option Plan (the “2018-ESOP”)

On September 26, 2018, the Board adopted the Company 2018 Employee Stock Option Plan (the “2018-ESOP”), formerly referred to as the “Amarillo Biosciences, Inc., 2018 Employee Stock Option Plan” in prior filings. The 2018-ESOP provides for the grant of Qualified Incentive Stock Options to the Company’s employees. The Board, in its adoption of the 2018-ESOP, directed the Officers to submit the 2018-ESOP to the shareholders for ratification and approval at the next scheduled shareholders meeting. Failure of the ratification and approval of the 2018-ESOP within one year of the effective date renders the qualified options to become nonqualified options for purposes of the U.S Internal Revenue Code. A stockholders meeting was not convened within the one year period and, as a result, any qualified options automatically became non-qualified options effective September 26, 2019.

The 2018-ESOP is administered by the Board or by a committee of directors appointed by the Board (the “Compensation Committee”) as constituted from time to time. The maximum number of shares of common stock which may be issued under the 2018-ESOP is 66,666 shares which will be reserved for issuance upon exercise of options.

The option price per share of common stock deliverable upon the exercise of an incentive stock option is 100% of the fair market value of a share on the date of grant. The option price is $5.70 per share and the options are exercisable during a period of ten years from the date of grant, where the options vest 20% annually over five years, commencing one year from date of grant.

Effective as of October 6, 2021, with the adoption by the Board of the 2021 SIP, no further awards may be granted under the 2018-ESOP and as discussed above because our shareholders did not approved the 2018-ESOP any qualified options automatically became non-qualified options effective September 26, 2019.

2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan (the “2018-NQSOP”)

On September 26, 2018, the Board adopted the Company 2018 Employee Stock Option Plan (the “2018-ESOP”), formerly referred to as the “Amarillo Biosciences, Inc., 2018 Employee Stock Option Plan” in prior filings. The 2018-ESOP provides for the grant of Qualified Incentive Stock Options to the Company’s employees. Qualified options automatically became non-qualified options effective September 26, 2019 and was governed under the 2018-NQSOP described below because the plan was not ratified by our shareholders. The maximum number of shares of common stock authorized under the plan was 66,666 shares. The option price per share of common stock deliverable upon the exercise of an incentive stock option was 100% of the fair market value of a share on the date of grant. The option price is $5.70 per share and the options are exercisable during a period of ten years from the date of grant, where the options vest 20% annually over five years, commencing one year from date of grant.

Effective as of October 6, 2021, with the adoption by the Board of the 2021 SIP, no further awards may be granted under the 2018-NQSOP and the 285,306 stock options that were previously forfeited was added to the share reserve under the Company’s 2021 Stock Incentive Plan.

2021 Employee Stock Purchase Plan (the “2021 ESPP”)

On September 28, 2021 and on May 16, 2022 the Board and our shareholders, respectively, approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP” or “Plan”). The purpose of the 2021 ESPP is to provide an opportunity for eligible employees of the company and its designated companies (as defined in the Plan) to purchase common stock at a discount through voluntary contributions, thereby attracting, retaining and rewarding such persons and strengthening the mutuality of interest between such persons and the Company’s stockholders. The Company intends for offerings under the Plan to qualify as an “employee stock purchase plan” under Section 423 of the Code; provided, that the Plan administrator may also authorize the grant of rights under offerings that are not intended to comply with the requirements of Section 423, pursuant to any rules, procedures, agreements, appendices, or sub-plans adopted by the administrator. Subject to adjustments as provided in the Plan, the maximum number of shares of common stock that may be issued under the Plan may not exceed 50,000 shares. Such shares may be authorized but unissued shares, treasury shares or shares purchased in the open market. The Plan is subject to approval by the Company’s stockholders within twelve months after the date of Board approval. The Plan will become effective on the date that stockholder approval is obtained, and will continue in effect until it expires on the tenth anniversary of the effective date of the Plan, unless terminated earlier.

2021 Stock Incentive Plan (the “2021 SIP”)

On September 28, 2021 and on May 16, 2022 the Board and our shareholders, respectively, approved the 2021 Stock Incentive Plan (the “2021 SIP” or “Plan”). The purpose of the 2021 SIP is to provide a means through which the Company, and the other members of the Company Group, defined by Section 2(n) of the Plan as the Company and its subsidiaries, and any other affiliate of the Company designated as a member of the Company Group by the Committee, may attract and retain key personnel, and to provide a means whereby directors, officers, employees, consultants and advisors of the Company and the other members of the Company Group can acquire and maintain an equity interest in the Company, or be paid incentive compensation measured by reference to the value of common stock, thereby strengthening their commitment to the interests of the Company Group and aligning their interests with those of the Company’s stockholders. The types of awards that may be granted from the Plan include individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Dividend Equivalent Rights and Other Equity-Based Award granted under the Plan. The Plan will be effective upon shareholder approval. The expiration date of the Plan, on and after which date no awards may be granted, will be the tenth anniversary of the date of Board approval of the Plan, provided, however, that such expiration will not affect awards then outstanding, and the terms and conditions of the Plan will continue to apply to such Awards. The aggregate number of shares which may be issued pursuant to awards under the Plan is 1,333,333 shares of Common Stock (the “Plan Share Reserve”), subject to adjustments as provided in the Plan. The number of shares underlying any award granted under 2018 ESOP or 2018 NQSOP (the “Prior Plans”) that expires, terminates or is canceled or forfeited for any reason whatsoever under the terms of the Prior Plans, will increase the Plan Share Reserve. Each Award granted under the Plan will reduce the Plan Share Reserve by the number of shares underlying the award. No more than 666,666 shares may be issued in the aggregate pursuant to the exercise of incentive stock options granted under the Plan. The maximum number of shares subject to awards granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such director during the fiscal year, will not exceed $600,000 in total value (calculating the value of any such awards based on their grant date fair value for financial reporting purposes).

Non-Employee Director Compensation Policy (the “2021 NEDCP”)

On September 28, 2021, the Company’s Board of Directors adopted the Company’s Non-Employee Director Compensation Policy (the “2021 NEDCP” or “Policy”). On appointment to the Board, and without any further action of the Board or Compensation Committee of the Board, at the close of business on the day of such appointment, each Non-Employee Director will automatically receive an award of 22,000 restricted stock units (“RSUs”) over Common Stock (the “Appointment Grant”). The Appointment Grant shall vest in three equal annual installments, with the first installment vesting on the last day of the six-month period commencing on the grant date and each subsequent installment vesting on the last day of the six-month period commencing on the next two subsequent anniversaries of the grant date, subject to the Director’s continuous service with us on each applicable vesting date. The RSUs shall be granted pursuant to the Company’s 2021 Stock Incentive Plan and shall be subject to such other provisions set forth in the agreement evidencing the award of the RSUs, in the form adopted from time to time by the Board or the Compensation Committee of the Board.

In addition to the RSU grants, each member of the Board of who is not an employee of the Company or any of subsidiaries will receive the cash compensation set forth below for service on the Board. The annual cash compensation amounts will be payable in equal quarterly installments, in arrears following the end of each quarter in which the service occurred, pro-rated for any partial months of service. All annual cash fees are vested upon payment.

1. Annual Board Service Retainer:

(a)	All Eligible Directors: $12,000
(b)	Chairperson of the Board: $14,000

2. Annual Committee Chair Service Retainer:

(a)	Chairperson of the Audit Committee: $7,000
(b)	Chairperson of the Compensation Committee: $4,500

3. Annual Committee Member Service Retainer:

(a)	Member of the Audit Committee: $4,000
(b)	Member of the Compensation Committee: $3,000

Restricted Stock Units

RSUs entitle the recipient to be paid out an equal number of common stock upon vesting. The fair value of RSUs is based on market price of the underlying stock on the date of grant. A summary of the Company’s RSU activity and related information for the year ended December 31, 2022 is as follows:

	Number of RSUs			Weighted-Average Grant Date Fair Value Per RSU
Balance as of December 31, 2021		-		$	N/A
RSUs granted		1,333,332		$	5.89
RSUs vested		(533,332	)	$	11.10
RSUs canceled		-		$	N/A
Balance as of December 31, 2022		800,000		$	2.42

The grant date fair value of RSUs awards that vested in the year ended December 31, 2022 was $5.9 million, and the fair value as of the respective vesting dates of RSU was $1 million for 2022.

Stock Options

A summary of option activity for the years ended December 31, 2022 and 2021 are presented below.

Date	Number of Options 1Qualified		Number of Options Nonqualified		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Balance at December 31, 2020		56,666		253,800	$	5.70	7 yrs			-
Granted		-		33,333	$	5.70	9 yrs			-
Exercised		1,333		10,026	$	5.70		-		-
Expired or Forfeited		62,000		223,306	$	5.70		-		-
Balance at December 31, 2021		3,333		33,333	$	5.70	6 yrs			-
Granted		-		-		-		-		-
Exercised		-		-		-		-		-
Expired or Forfeited		-		-		-		-		-
Balance at December 31, 2022		3,333		33,333	$	5.70	8.55 yrs			-
Exercisable at December 31, 2022		2,666		11,111	$	5.70	5.74 yrs			-

¹ Because the 2018 Employee Stock Option Plan was not ratified by the Company’s shareholders, the qualified options became non-qualified on September 26, 2019. These totals remain separated since the two different plans are still in existence.

The Company used the Black-Scholes option pricing model to value the option awards with the following assumptions applied: (1) Volatility – 276%; (2) Term – 5 years was chosen although the full option term is 10 years to be more commensurate with the 5-year vesting portion of the plan; (3) Discount – 2.96%.

Share-Based Compensation

The share-based compensation for the year ended December 31, 2022 and 2021 were $6,421,879 and $(10,683), respectively.

As of December 31, 2022, the total unrecognized compensation cost related to outstanding RSUs, stock options and warrant was $1,894,324, which the Company expects to recognize over a weighted-average period of 1.73 years.

As of December 31, 2021, there is $410,022 in unrecognized option expense that will be recognized over the next 2.58 years.