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STOCK COMPENSATION | 12 Months Ended
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Sep. 30, 2021
STOCK COMPENSATION |
8. STOCK COMPENSATION |
8. | STOCK COMPENSATION
| The Company recognized the following expenses for options issued or vested and restricted stock awarded during the year:
|  | Year Ended September 30, |
|  | 2021 |  |  | 2020 |
Employees |  | $ | 13,685,046 |  |  | $ | 10,112,968 |
Non-employees |  | $ | 1,226,690 |  |  | $ | 862,796 |
| During the years ended September 30, 2021 and 2020 the fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions.
|  | 2021 |  |  | 2020 |
Expected stock price volatility |  | 90.42 – 97.22% |  |  | 87.36 – 90.26% |
Risk-free interest rate |  | 0.85 – 1.65% |  |  | 0.62 – 1.87% |
Expected life of options |  | 9.68 – 9.69 Years |  |  | 9.68 – 9.69 Years |
Expected dividend yield |  |  | - |  |  |  | - |
| Non-Qualified Stock Option Plan s –
| During the year ended September 30, 2021, the Company adopted the 2021 Non-Qualified Stock Option Plan, which provides for the issuance of up to 1,800,000 options to purchase shares of common stock. On May 14, 2021, the Company granted 1,800,000 performance-based stock options from the 2021 Non-Qualified Stock Option Plan and 72,000 performance-based stock options from the 2020 Non-Qualified Stock Option Plan to officers and directors. Each option entitles the holder to purchase one share of the Company's common stock at a price of $20.61 per share, the fair value on the date of issuance. The stock options will vest 100% upon the achievement of the following performance goals: (a) the filing of the first marketing application for any pharmaceutical based upon the Company's Multikine technology, in the US, Canada, UK, Germany, France, Italy, Spain, Japan, or Australia or (b) the closing price of the Company's common stock exceeds $42.00. None of the options will be exercisable before May 13, 2022. All options which have not vested as of May 13, 2031, will be canceled and will no longer be exercisable. The options were recorded in permanent equity in accordance with ASC 718, Compensation – Stock Compensation. On the grant date, the options were valued using a Monte Carlo Simulation approach. Monte Carlo Simulation is a statistical technique that is used to model probabilistic systems and establish the probabilities for a variety of outcomes. That valuation resulted in a per share fair value of $0.34 and an aggregate value of approximately $636,000 on the grant date. The aggregate value will be expensed over the requisite service period of the options, which was determined to be 1.3 years. This resulted in compensation expense of approximately $189,000 recorded during the year ended September 30, 2021. The remaining $447,000 will be expensed over the next 11 months.
| During the year ended September 30, 2020, the Company adopted the 2020 Non-Qualified Stock Option Plan, which provides for the issuance of up to 3,600,000 options to purchase shares of common stock. On April 20, 2020, the Company granted 1,872,000 performance-based stock options from the 2020 Non-Qualified Stock Option Plan to officers and directors. Each option entitles the holder to purchase one share of the Company's common stock at a price of $10.93 per share, the fair value on the date of issuance. The stock options vest upon the achievement of the following market conditions: i) 25% of the options will vest when the closing price of the Company's common stock exceeds $20.00 for ten consecutive trading days; ii) 50% of the options will vest when the closing price of the Company's common stock exceeds $25.00 for ten consecutive trading days; and iii) 75% of the options will vest when the closing price of the Company's common stock exceeds $30.00 for ten consecutive trading days. Additionally, 100% of the options will vest when either (a) the first marketing application for any pharmaceutical based upon the Company's Multikine technology, in the US, Canada, UK, Germany, France, Italy, Spain, Japan, or Australia is filed, i.e., the performance condition, or (b) the closing price of the Company's common stock exceeds $40.00 for ten consecutive trading days. All options which have not vested as of April 19, 2030, will be canceled and will no longer be exercisable. The options were recorded as permanent equity in accordance with ASC 718, Compensation – Stock Compensation. On the grant date, the options were valued using a Monte Carlo Simulation approach. That valuation resulted in a per share fair value of $4.21 and an aggregate value of approximately $7.9 million on the grant date. The aggregate value will be expensed over the requisite service period of the options, which was originally determined to be 1.7 years. In May 2021, it became probable that the performance condition would be met approximately 8 months later than originally estimated. Because the valuation and related requisite service period were based on achievement of the performance condition, the Company adjusted the requisite service period when it became probable that the marketing application would be filed within a different period. Compensation expense relating to this Plan was approximately $3.8 million and $2.1 million during the years ended September 30, 2021 and 2020, respectively. The remaining $2.0 million will be expensed over the next 11 months.
| At September 30, 2021, the Company has collectively authorized the issuance of 11,787,200 shares of common stock under its Non-Qualified Stock Option Plans. Options typically vest over a three-year period and expire no later than ten years after the grant date. Terms of the options were determined by the Company’s Compensation Committee which administers the plans. The Company’s employees, directors, officers, and consultants or advisors are eligible to be granted options under the Non-Qualified Stock Option Plans.
| Incentive Stock Option Plan s – At September 30, 2021, the Company had collectively authorized the issuance of 138,400 shares of common stock under its Incentive Stock Option Plans. Options typically vest over a three-year period and expire no later than ten years after the grant date. Terms of the options were determined by the Company’s Compensation Committee which administers the Plans. Only the Company’s employees are eligible to be granted options under the Incentive Stock Option Plans.
| Activity in the Company’s Non-Qualified and Incentive Stock Option Plans for the two years ended September 30, 2021 is summarized as follows:
Non-Qualified and Incentive Stock Option Plans
|  | Outstanding |  |  | Exercisable |
|  | Number of Shares |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Term (Years) |  |  | Aggregate Intrinsic Value |  |  | Number of Shares |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Term (Years) |  |  | Aggregate Intrinsic Value |
Outstanding at September 30, 2019 |  |  | 6,218,216 |  |  | $ | 5.54 |  |  |  | 8.88 |  |  | $ | 29,562,594 |  |  |  | 1,392,241 |  |  | $ | 9.15 |  |  |  | 7.68 |  |  | $ | 7,869,555 |
Vested |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 2,014,501 |  |  | $ | 4.06 |  |  |  |  |  |  |  |  |
Granted |  |  | 2,563,000 |  |  | $ | 10.93 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Exercised |  |  | 99,740 |  |  | $ | 3.39 |  |  |  |  |  |  |  |  |  |  |  | 99,740 |  |  | $ | 3.39 |  |  |  |  |  |  |  |  |
Forfeited |  |  | 18,000 |  |  | $ | 10.34 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Expired |  |  | 9,773 |  |  | $ | 132.75 |  |  |  |  |  |  |  |  |  |  |  | 9,773 |  |  | $ | 132.75 |  |  |  |  |  |  |  |  |
Outstanding at September 30, 2020 |  |  | 8,653,703 |  |  | $ | 7.01 |  |  |  | 8.39 |  |  | $ | 56,193,415 |  |  |  | 3,297,229 |  |  | $ | 5.85 |  |  |  | 7.48 |  |  | $ | 29,090,662 |
Vested |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 2,401,961 |  |  | $ | 6.26 |  |  |  |  |  |  |  |  |
Granted (a) |  |  | 2,605,000 |  |  | $ | 20.58 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Exercised |  |  | 149,788 |  |  | $ | 4.98 |  |  |  |  |  |  |  |  |  |  |  | 149,788 |  |  | $ | 4.98 |  |  |  |  |  |  |  |  |
Forfeited |  |  | 49,832 |  |  | $ | 9.56 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Expired |  |  | 9,374 |  |  | $ | 172.73 |  |  |  |  |  |  |  |  |  |  |  | 9,374 |  |  | $ | 172.73 |  |  |  |  |  |  |  |  |
Outstanding at September 30, 2021 |  |  | 11,049,709 |  |  | $ | 10.08 |  |  |  | 7.93 |  |  | $ | 54,843,283 |  |  |  | 5,540,028 |  |  | $ | 5.77 |  |  |  | 6.96 |  |  | $ | 43,589,598 |
______________
(a) | Includes 1,872,000 performance based options issued to officers and directors, 728,000 options issued to employees and 5,000 options issued to Consultants.
| A summary of the status of the Company’s non-vested options for the two years ended September 30, 2021 is presented below:
|  | Number of Options |  |  | Weighted Average Grant Date Fair Value |
Unvested at September 30, 2019 |  |  | 4,825,975 |  |  | $ | 3.79 |
Vested |  |  | (2,014,501 | ) |  |  |  |
Granted |  |  | 2,563,000 |  |  |  |  |
Forfeited |  |  | (18,000 | ) |  |  |  |
Unvested at September 30, 2020 |  |  | 5,356,474 |  |  | $ | 4.76 |
Vested |  |  | (2,401,961 | ) |  |  |  |
Granted |  |  | 2,605,000 |  |  |  |  |
Forfeited |  |  | (49,832 | ) |  |  |  |
Unvested at September 30, 2021 |  |  | 5,509,681 |  |  | $ | 5.17 |
| Incentive Stock Bonus Plan – On September 30, 2021, 614,500 of the shares granted under the 2014 Incentive Stock Bonus Plan remain outstanding, of which 463,250 shares are fully vested. The shares are being earned upon the achievement of certain milestones leading to the commercialization of the Company’s Multikine technology, or specified increases in the market price of the Company’s stock. The fair value of the shares on the grant date was calculated using the market value on the grant-date for issuances where the attainment of performance criteria is likely and using a Monte Carlo Simulation for issuances where the attainment of performance criteria is uncertain. The grant date fair value of shares issued that remain outstanding as of September 30, 2021 was approximately $8.6 million. The total value of the shares, if earned, is being expensed over the requisite service periods for each milestone, provided the requisite service periods are rendered, regardless of whether the market conditions are met. No compensation cost is recognized for awards where the requisite service period is not rendered. During each of the years ended September 30, 2021 and 2020, the Company recorded expense relating to the issuance of restricted stock pursuant to the plan of approximately $0.3 million. At September 30, 2021, the Company has unrecognized compensation expense of approximately $45,000 which is expected to be fully recognized in the next quarter.
| A summary of the status of the Company’s restricted common stock issued from the Incentive Stock Bonus Plan for the two years ended September 30, 2021 is presented below:
|  | Number of Shares |  |  | Weighted Average Grant Date Fair Value |
Unvested at September 30, 2019 |  |  | 304,500 |  |  | $ | 13.75 |
Forfeited |  |  | - |  |  |  |  |
Vested |  |  | - |  |  |  |  |
Unvested at September 30, 2020 |  |  | 304,500 |  |  | $ | 13.75 |
Forfeited |  |  | (2,000 | ) |  |  |  |
Vested |  |  | (151,250 | ) |  |  |  |
Unvested at September 30, 2021 |  |  | 151,250 |  |  | $ | 13.75 |
| Stock Bonus Plans – As of September 30, 2021, the Company has issued a total of 363,086 shares of common stock from the Stock Bonus Plans and was authorized to issue up to 783,760 shares of common stock under its Stock Bonus Plans. All employees, directors, officers, consultants, and advisors are eligible to be granted shares.
| Stock Compensation Plan s – On September 30, 2021, 634,000 shares were authorized for use in the Company’s Stock Compensation Plans, of which 154,195 shares were issued and outstanding. No shares were issued from the Stock Compensation Plans to consultants for payment of services during the years ended September 30, 2021, and 2020.

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