ShareBased Compensation

3 Months Ended

Mar. 31, 2023

ShareBased Compensation

Share-Based Compensation

4. Share-Based Compensation

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. 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-ESOP.

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

On September 26, 2018, the Board adopted the Company 2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan (the “2018-NQSOP”), formerly referred to as the “Amarillo Biosciences, Inc., 2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan” in prior filings. The 2018-NQSOP provides for the grant of nonqualified incentive stock options to employees. The 2018-NQSOP is administered by the Board or by the Compensation Committee as constituted from time to time. The maximum number of shares of common stock which may be issued under the 2018-NQSOP is 266,666 which will be reserved for issuance upon exercise of options. The option price for the nonqualified options is $5.73 exercisable for a period of ten years, with a vesting period of five years at 20% per year 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. As of March 31, 2023, options to acquire 36,666 shares of common stock remained outstanding.

2021 Employee Stock Purchase Plan

On September 28, 2021, the Board and on May 16, 2022 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

On September 28, 2021, the Board and on May 16, 2022 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 became effective on June 21, 2022. The expiration date of the Plan, on and after which date no awards may be granted, is October 6, 2031 (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).

During the first quarter of 2023, the Company did not issue any award under the 2021 SIP.

Restricted Stock Units

RSUs entitle the recipient to be paid out an equal number of common stock shares 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 three months ended March 31, 2023, is as follows:

	Number of RSUs			Weighted- Average Grant Date Fair Value Per RSU
Unvested balance at December 31, 2022		800,000		$	2.42
RSUs granted		-		$	N/A
RSUs vested		(29,332	)	$	11.1
RSUs canceled		(38,000	)	$	1.43
Unvested balance at March 31, 2023		732,668		$	2.12

Stock Options

A summary of option activity for the three months ended March 31, 2023 is presented below:

Date	Number of Options 1Qualified	Number of Options 2 Nonqualified	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Balance at December 31, 2021	3,333	33,333	$5.70	9.54 yrs	-
Granted	-	-	-	-	-
Exercised	-	-	-	-	-
Expired or Forfeited	-	-	-	-	-
Balance at December 31, 2022	3,333	33,333	$5.70	8.55 yrs	-
Granted	-	-	-	-	-
Exercised	-	-	-	-	-
Expired or Forfeited	-	-	-	-	-
Balance at March  31, 2023	3,333	33,333	$5.70	8.32 yrs	-
Exercisable at  March 31, 2023	2,666	11,111	$5.70	8.32 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%.

 ²  The Company used the Black-Scholes option pricing model to value the option awards with the following assumptions applied: (1) Volatility – 238%; (2) Term – 3 years was chosen although the full option term is 5 years to be more commensurate with the 3-year vesting portion of the plan; (3) Discount – 0.81%.  

Warrants

On November 25, 2020, the Company issued a warrant to i2China Management Group, LLC, a related party of the Company since August 1, 2021.  The warrant entitles the holder to purchase 30,174 shares at $3.98 and expires on November 24, 2025.

Share-Based Compensation

Shared-based compensation for the three months ended March 31, 2023 and 2022 were $220,832 and $43,443, respectively.

As of March 31, 2023, the total unrecognized compensation cost related to outstanding RSUs, stock options and warrant was $1,672,370, which the Company expects to recognize over a weighted-average period of 1.69 years.