STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2021

Compensation Related Costs [Abstract]

STOCK-BASED COMPENSATION

NOTE 10 – STOCK-BASED COMPENSATION

Options

Pursuant to the Oncotelic merger, the Company’s Common Stock and corresponding outstanding options survived. The below information details the Company’s associated option activity.

As of September 30, 2021, options to purchase Common Stock were outstanding under three stock option plans – the 2017 Equity Incentive Plan (the “2017 Plan”), the 2015 Equity Incentive Plan (the “2015 Plan”) and the 2005 Stock Plan (the “2005 Plan”). Under the 2017 Plan, up to 2,000,000 shares of the Company’s Common Stock may be issued pursuant to awards granted in the form of nonqualified stock options, restricted and unrestricted stock awards, and other stock-based awards. Under the 2015 and 2005 Plans, taken together, up to 7,250,000 shares of the Company’s Common Stock may be issued pursuant to awards granted in the form of incentive stock options, nonqualified stock options, restricted and unrestricted stock awards, and other stock-based awards.

Employees, consultants, and directors are eligible for awards granted under the 2017 and 2015 Plans. The Company registered an additional total of 20,000,000 shares of its Common Stock, which may be issued pursuant to the Registrant’s Amended and Restated 2015 Equity Incentive Plan (the “Plan”). Such additional shares were approved by the shareholders of the Company on August 10, 2020 and as reported to the Securities and Exchange Commission (the “SEC”) vide a Current Report on Form 8-K on August 14, 2020. As such, the total number of shares of the Company’s Common Stock available for issuance under the 2015 plan is 27,250,000. After June 30, 2021, the Company issued 1,257,952 of its common shares in lieu of fully vested restricted stock units and 4,244,809 incentive and non-qualified stock options to purchase its Common Stock to its employees. All these grants had been approved by the Board of Directors of the Company under the 2015 Plan.

Since the adoption of the 2015 Plan, no further awards may be granted under the 2005 Plan, although options previously granted remain outstanding in accordance with their terms.

Compensation based stock option activity for qualified and unqualified stock options are summarized as follows:

			Weighted
For the nine months ended September 30, 2021			Average
	Shares		Exercise Price
Outstanding at January 1, 2021		3,941,301	$	0.78
Issued during the three and nine months ended September 30, 2021		11,394,809		0.15
Outstanding at September 30, 2021		15,336,110	$	0.31

For the year ended December 31, 2020

				Weighted
				Average
	Shares			Exercise Price
Outstanding at January 1, 2020		6,145,044		$	0.75
Expired or canceled		(2,203,743	)		0.70
Outstanding at December 31, 2020		3,941,301		$	0.78

The following table summarizes information about options to purchase shares of the Company’s Common Stock outstanding and exercisable at September 30, 2021:

						Weighted-
				Weighted-		Average
		Outstanding		Average		Exercise		Number
Exercise prices		Options		Remaining Life		Price		Exercisable
$	0.14		7,150,000		9.92	$	0.14		265,000
	0.16		4,244,809		9.77		0.16		4,244,809
	0.22		1,750,000		4.84		0.22		1,750,000
	0.38		900,000		4.16		0.38		900,000
	0.73		762,500		3.78		0.73		762,500
	1.37		150,000		2.00		1.37		150,000
	1.43		300,000		3.91		1.43		300,000
	11.88		2,359		0.51		11.88		2,359
	15.00		75,000		3.91		15.00		75,000
	19.80		1,442		0.34		19.80		1,442
			15,336,110		8.37	$	0.31		8,451,110

The compensation expense attributed to the issuance of the options is recognized as they are vested.

The employee stock option plan stock options are generally exercisable for ten years from the grant date and vest over various terms from the grant date to three years.

The aggregate intrinsic value totaled $0 and was based on the Company’s closing stock price of $0.14 as of September 30, 2021, which would have been received by the option holders had all option holders exercised their options as of that date. Correspondingly, the aggregate intrinsic value totaled $0 and was based on the Company’s closing stock price of $0.22 as of December 31, 2020, which would have been received by the option holders had all option holders exercised their options as of that date.

As of September 30, 2021, there was no future compensation cost as all stock options vested prior to December 31, 2019 and the compensation was fully expensed prior to the 2019 merger between the Company and Oncotelic, Inc. In August 2019, the Company had entered into Employment Agreements and incentive compensation arrangements with each of its executive officers, including Dr. Vuong Trieu, the Chief Executive Officer (“CEO”); Dr. Chulho Park, its prior Chief Technology Officer (“CTO’); and Mr. Amit Shah, the Chief Financial Officer (“CFO”). The incentive stock options and the restricted stock awards approved for the Company’s executive officers were granted and issued in July 2021. The Company issued an aggregate of 1,257,952 of its common shares in lieu of fully vested restricted stock units and 4,244,809 incentive and non-qualified stock options to purchase its Common Stock to all its employees, including the awards due to the CEO, CFO, the prior CTO and Saran Saund, the Chief Business Officer of the Company. Further, the Company issued all its employees, including the CEO and CBO, 4,325,000 performance-based stock options that would vest over two tranches subject to certain corporate goals being achieved, none of which have vested as of September 30, 2021. In addition, the Company granted its Board of Directors and certain consultants 2,825,000 stock options, which for the Board of Directors vest over 5 quarters commencing the quarter ended September 30, 2021 and for the consultants on the same basis as the Company’s employees. Of the options granted to the Board members, 265,000 have vested as of September 30, 2021.

The Company recorded a fair value stock-based compensation of $299,890 for the vested stock options during the three and nine months ended September 30,2021. No similar expense was recorded during the same periods in 2020. The fair value of the stock compensation expense, using a Black Scholes valuation model, was calculated using the following input values.

Expected Term	1 year
Expected volatility		97.3 – 110.0	%
Risk-free interest rates		0.05	%
Dividend yields		0.00	%

In addition, the Company recorded a fair value stock-based compensation of $226,431 for the fully vested restricted stock units issued during the three and nine months ended September 30,2021, and which had been granted to the employees in August 2019. No similar expense was recorded during the same periods in 2020. The fair value of the stock compensation expense was calculated using the stock price of the restricted stock units on the date of the grant as they were fully vested.

Warrants

Pursuant to the Oncotelic merger, the Company’s Common Stock and corresponding outstanding warrants survived. The below information represents the Company’s associated warrant activity.

During the three months ended March 31, 2021, 2,035,000 warrants were issued related to private placement. The fair value of these warrants on issue date amounted to $467,637 with an expected life of 1.5 years, as calculated using Black Scholes valuation model. Further, during the three months ended June 30, 2021, and as disclosed in Note 6 above, the Company issued 20,000,000 warrants were issued related to private placement. The fair value of these warrants on issue date amounted to $2,023,552 with an expected life of 1-2 years, as calculated using Black Scholes valuation model.

In February 2020, the Company offered to cancel to all the prior warrants of the warrant holders from the 2018 debt financing and offered to reissue new warrants to such warrant holders. Out of all the warrant holders, holders of 13,750,000 warrants opted to participate in the reissuance during the same period in 2020. The company recognized stock-based compensation of $2.1 million as the fair value of the warrants using a Black Scholes valuation model. No similar expense was recorded for the three months ended March 31, 2021.

The issuance of warrants to purchase shares of the Company’s Common Stock, including those attributed to debt issuances, as of September 30, 2021 and December 31, 2020 are summarized as follows:

			Weighted-
			Average
	Shares		Exercise Price
Outstanding at January 1, 2021		18,702,500	$	0.20
Issued during nine months ended September 30, 2021		24,035,000		0.20
Outstanding at September 30, 2021		42,737,500	$	0.20

				Weighted-
				Average
For the year ended December 31, 2020	Shares			Exercise Price
Outstanding at January 1, 2020		19,515,787		$	0.60
Issued during the year ended December 31, 2020		17,215,000			0.20
Expired or cancelled		(18,028,287	)		0.63
Outstanding at December 31, 2020		18,702,500		$	0.20

The following table summarizes information about warrants outstanding and exercisable at September 30, 2021:

		Outstanding and exercisable
			Weighted-		Weighted-
			Average		Average
		Number	Remaining Life		Exercise	Number
	Exercise Price	Outstanding	in Years		Price	Exercisable
$	0.20	1,487,500	2.08	$	0.20	1,487,500
	0.20	41,250,000	2.15		0.20	41,250,000
		42,737,500	2.15	$	0.20	42,737,500

The Company issued 24,035,000 warrants during the nine months ended September 30, 2021, of which 22,000,000 warrants issued during the three months ended June 30, 2021. The Company recorded stock-based compensation of approximately $2.0 million, as fair value of the warrants, using a Black Scholes valuation model using the following input values. The expense attributed to the issuances of the warrants was recognized as they vested/earned. These warrants are exercisable for three to five years from the grant date. All the warrants are currently exercisable.

Expected Term	1-2 years
Expected volatility		94.4 – 130.0	%
Risk-free interest rates		0.08 – 0.25	%
Dividend yields		0.00	%

The Company issued 13,750,000 warrants issued during the nine months ended September 30, 2020 were as recorded stock-based compensation of $2.1 million as the fair value of the warrants using a Black Scholes valuation model using the following input values. The expense attributed to the issuances of the warrants was recognized as they vested/earned. These warrants are exercisable for three to five years from the grant date. All the warrants are currently exercisable.

Expected Term	3 years
Expected volatility		140.5	%
Risk-free interest rates		1.40	%
Dividend yields		0.00	%