NOTE

– STOCKHOLDERS’ EQUITY, STOCK OPTIONS AND WARRANTS

2019

Registered Direct Offerings

March 1, 2019,

the Company completed a registered direct offering selling

1,385,000

shares of the Company’s common stock and warrants to purchase up to

692,500

shares of common stock. The common stock and warrants were sold in units with each unit consisting of

one

share of common stock and a warrant to purchase

0.5

of a share of common stock at an exercise price of

$1.00

per whole share. The units were sold at a price of

$0.90

per unit, resulting in gross proceeds to the Company of

$1,246,608,

before deducting expenses. The Company granted the underwriter unit purchase options, pursuant to which the Company granted the underwriter or its assignees the right to purchase from the Company up to an aggregate of

69,250

units and an exercise price equal to

125%

of the public offering price of the units in the offering, or

$1.125

per unit. The unit purchase options shall expire on

February 27, 2024.

March 29, 2019,

the Company completed a registered direct offering selling

1,478,750

shares of the Company’s common stock and warrants to purchase up to

739,377

shares of common stock. The common stock and warrants were sold in units with each unit consisting of

one

share of common stock and a warrant to purchase

0.5

of a share of common stock at an exercise price of

$1.00

per whole share. The units were sold at a price of

$0.80

per unit, resulting in gross proceeds to the Company of

$1,183,101,

73,937

units and an exercise price equal to

125%

of the public offering price of the units in the offering, or

$1.00

per unit. The unit purchase options shall expire on

March 27, 2024.

Increases in Authorized Shares

At the annual meeting on

December 28, 2017,

the stockholders approved a proposal to increase the number of authorized shares of common stock from

24,000,000

50,000,000

shares of common stock,

$0.01

par value. The amendment to the certificate of incorporation to affect this increase was filed on

January 2, 2018.

At a special meeting of the stockholders on

March 22, 2019,

the stockholders approved a proposal to increase the number of authorized shares of common stock from

50,000,000

100,000,000

shares of common stock,

$0.01

par value. The amendment to the certificate of incorporation to affect this measure was filed on

March 22, 2019.

At a special meeting of the stockholders on

March 22, 2019,

the stockholders approved an amendment to the Amended and Restated

2012

Stock Incentive Plan to (a) increase the reserve of shares of common stock authorized for issuance thereunder to

10,000,000,

(b) increase certain thresholds for limitations on grants, and (c) reapprove the performance goals thereunder.

Equity Incentive Plan

The Company has an equity incentive plan, which allows issuance of incentive and non-qualified stock options to employees, directors and consultants of the Company, where permitted under the plan. The exercise price for each stock option is determined by the Board of Directors. Vesting requirements are determined by the Board of Directors when granted and currently range from immediate to

three

years. Options under this plan have terms ranging from

three

ten

years.

Accounting for share-based payment

The Company uses the Black-Scholes option valuation model which requires the input of significant assumptions including an estimate of the average period of time employees will retain vested stock options before exercising them, the estimated volatility of the Company's common stock price over the expected term, the expected dividend rate, the risk-free interest rate, and forfeiture taken at occurrence. Changes in the assumptions can materially affect the estimate of fair value of stock-based compensation and, consequently, the related expense recognized. The assumptions the Company uses in calculating the fair value of stock-based payment awards represent the Company's best estimates, which involve inherent uncertainties and the application of management's judgment. As a result, if factors change and the Company uses different assumptions, the Company's equity-based compensation expense could be materially different in the future.

The Company has experienced

significant option exercises in its history. Beginning in

2019,

the Company began calculating the estimated volatility used in the Black-Scholes option valuation model based on the trading history of the Company’s own stock. Given the limited trading history of the Company’s common stock, the Company had previously used the volatility of comparable companies in order to value options and warrants granted in prior years.

When an option or warrant is granted in place of cash compensation for services, the Company deems the value of the service rendered to be the value of the option or warrant. In most cases, however, an option or warrant is granted in addition to other forms of compensation and its separate value is difficult to determine without utilizing an option pricing model. For that reason the Company also uses the Black-Scholes option-pricing model to value options and warrants granted to non-employees, which requires the input of significant assumptions including an estimate of the average period the investors or consultants will retain vested stock options and warrants before exercising them, the estimated volatility of the Company's common stock price over the expected term, the number of options and warrants that will ultimately be forfeited before completing vesting requirements, the expected dividend rate and the risk-free interest rate. Changes in the assumptions can materially affect the estimate of fair value of stock-based consulting and/or compensation and, consequently, the related expense recognized.

Valuation and accounting for options and warrants

The Company determines the grant date fair value of options and warrants using a Black-Scholes option valuation model based upon assumptions regarding risk-free interest rate, expected dividend rate, volatility and estimated term.

For grants of stock option and warrants issued during the quarter ended

March 31, 2019,

the Company used

2.41%

2.76%

risk free interest rate,

dividend rate,

79.8%

volatility and estimated terms of

years. Value computed using these assumptions ranged from

$0.4112

$.7644

per share.

The following summarizes transactions for stock options and warrants for the periods indicated:

	Stock Options					Warrants
	Number of Shares			Average Exercise Price		Number of Shares			Average Exercise Price
Outstanding at December 31, 2017		2,764,983		$	2.00		1,951,257		$	23.74

Issued		1,098,858			1.01		2,336,154			1.07
Expired		(194,564	)		2.00		(10,706	)		199.55
Exercised		-			-		(650,062	)		1.00

Outstanding at December 31, 2018		3,669,277		$	1.70		3,626,643		$	4.17

Issued		459,169			0.73		2,325,406			0.92
Expired		(56,867	)		2.00		(919	)		603.89

Outstanding at March 31, 2019		4,071,579		$	1.59		5,951,130		$	3.29

March 31, 2019,

3,346,375

stock options are fully vested and currently exercisable with a weighted average exercise price of

$1.70

and a weighted average remaining term of

8.72

years. There are

4,750,221

warrants that are fully vested and exercisable. Stock-based compensation recognized for the

three

months ended

March 31, 2019

and

March 31, 2018

was

$263,600

and

$226,387,

respectively. The Company has

$130,839

of unrecognized compensation expense related to non-vested stock options that are expected to be recognized over the next

months.

The following summarizes the status of options and warrants outstanding at

March 31, 2019:

Range of Prices		Shares		Weighted Remaining Life
Options
$	0.619		524,958		9.77
$	0.75		33,335		10.00
$	0.82		60,000		9.67
$	0.849		3,534		9.80
$	0.90		30,000		9.92
$	0.91		10,000		9.05
$	0.965		3,000		9.13
$	0.97		191,753		8.77
$	1.01		149,110		8.88
$	1.06		23,585		9.51
$	1.10		86,958		9.22
$	1.125		69,250		4.92
$	1.13		195,931		9.31
$	1.15		21,740		9.34
$	1.16		66,451		9.35
$	1.18		30,000		9.36
$	1.20		41,668		9.34
$	1.21		30,000		9.86
$	1.35		111,112		8.96
$	1.454		17,200		8.51
$	1.47		2,271,476		8.24
$	2.10		14,286		8.01
$	2.25		293		7.41
$	2.42		20,640		7.39
$	2.80		57,145		7.76
$	3.75		4,000		7.25
$	4.125		3,636		7.51
$	4.1975		7,147		7.47
$	4.25		3,529		7.01
$	5.125		3,902		7.44
$	65.75		190		6.56
$	73.50		1,157		6.76
$	77.50		2,323		6.25
$	80.25		187		6.51
$	86.25		232		6.01
$	131.25		81		3.44
$	148.125		928		3.97
$	150.00		1,760		3.38
$	162.50		123		5.76
$	206.25		121		5.51
$	248.4375		121		4.29
$	262.50		77		4.26
$	281.25		529		3.80
$	318.75		3		4.11
$	346.875		72		5.01
$	431.25		306		4.94
$	506.25		188		4.76
$	596.25		42		4.50

			4,071,579

Warrants
$	0.70		754,642		4.78
$	0.836		221,292		4.67
$	1.00		2,495,811		4.34
$	1.07		697,946		3.60
$	1.155		1,071,776		4.50
$	1.188		138,889		4.78
$	1.3125		86,086		4.51
$	2.25		385,000		2.82
$	123.75		94,084		1.42
$	243.75		2,529		0.35
$	309.375		2,850		0.86
$	309.50		223		0.60
			5,951,130

Stock Options and Warrants Granted by the Company

The following table is the listing of stock options and warrants as of

March 31, 2019

by year of grant:

Stock Options:
Year	Shares		Price
2011		173		$281.25
2012		1,841	131.25	–	150.00
2013		1,500	148.13	–	596.25
2014		836	162.50	–	431.25
2015		4,088	65.75	–	86.25
2016		100,294	2.25	–	5.13
2017		2,427,320	1.01	–	2.10
2018		1,076,358	0.62	–	1.35
2019		459,169	0.62	–	1.13
Total		4,071,579	$0.62	–	$596.25

Warrants:
Year	Shares		Price
2014		5,536	$243.75	–	$309.50
2015		94,151	0.00	–	243.75
2016		252,333		1.00
2017		1,082,946	1.07	–	2.25
2018		2,190,758	0.84	–	1.155
2019		2,325,406	0.704	–	1.19
Total		5,951,130	$0.00	–	$309.50