NOTE

- DERIVATIVES

Management concluded the

September 2018

bridge loan contains a conversion feature which is an embedded derivative and required bifurcation. The embedded derivative's value was determined using the discounted stock price for the

-trading days preceding the balance sheet date and the assumption of conversion on that date, as management believed it was probable that the notes would be convertible based on management's expectation that additional financing would be required. During the

six

months ended

June 30, 2020,

the maximum number of conversions was reached. The Company recognized an unrealized gain or (loss) for the corresponding change in fair value of

$50,989

and (

$211,939

) for the

three

months ended

June 30, 2020

and

June 30, 2019,

respectively and

$50,989

and (

$231,347

) for the

six

months ended

June 30, 2020

and

June 30, 2019,

respectively. The fair value of the derivative liability related to the bridge loan was

zero

as of

June 30, 2020

and

$50,989

as of

December 31, 2019.

May 21, 2019,

the Company issued a common stock purchase warrant to Dr. Schwartz for value received in connection with the First Note. Beginning on

February 1, 2019

and the

first

day of each calendar month thereafter while the First Note and associated warrants remained outstanding, a number of additional shares were added to the warrant. The Company accounted for the liability to issue more warrants as a derivative liability as the exact number of warrants to be issued was uncertain at the time of the agreement. The Company issued

5,753

warrants to Dr. Schwartz under the agreement in

2019.

The remaining derivative liability of

$22,644

was reduced to

zero

as of

December 31, 2019,

due to the exchange agreement in

January 2020,

which eliminated the issuance of any future warrants and voided all previously issued warrants related to these notes.

Management concluded the Promissory Note

2020

contains a conversion feature and a put each of which is an embedded derivative and are required to be bifurcated. In accordance with ASC

815,

Derivatives and Hedging

, the Company combined these

two

embedded derivatives into a single derivative and determined the fair value to record within the derivative liability on the condensed consolidated balance sheet. At inception, the fair value of the derivative liability was

$68,796,

$52,125

and

$20,542

for the first,

second

and

third

tranches, respectively. During the

three

months ended

June 30, 2020,

the Company recognized a gain on the change in the fair value of the derivative liability. As of

June 30, 2020,

the fair value of the derivative liability was

$7,628,

$8,907

and

$12,210

for the first,

second

and

third

tranches, respectively.

Management concluded the A, B and agent warrants issued in connection with the

March 2020

Private Placement discussed above are a derivative liability due to certain features of the warrants which could, in certain circumstances, result in the holder receiving the Black Scholes value of the outstanding warrants in the same type of consideration as the common stockholders. As a result, in those circumstances, the amount of consideration would differ from that provided to holders of common stock, therefore, the warrants have been classified as a liability. At inception, the A, B and agent warrants had a fair value of

$2,669,995.

As of

June 30, 2020,

the fair value of the A, B and agent warrants was determined to be

$2,830,744

and the Company recorded a loss on the change in fair value of

$51,026

and

$160,749

during the

three

and

six

months ended

June 30, 2020,

respectively.

Management concluded the warrants and agent warrants issued in connection with the

May 2020

Offering discussed above are a derivative liability due to certain features of the warrants which could, in certain circumstances, result in the holder receiving the Black Scholes value of the outstanding warrants in the same type of consideration as the common stockholders. As a result, in those circumstances, the amount of consideration would differ from that provided to holders of common stock, therefore, the warrants have been classified as a liability. At inception, the warrants and agent warrants had a fair value of

$1,324,184.

During

June 2020,

the investors exercised the warrants and exchanged the warrants for shares of common stock as discussed above. The Company recorded a loss on the change in fair value of the warrants of

$460,065

during the

three

and

six

months ended

June 30, 2020.

As of

June 30, 2020,

the fair value of the agent warrants was determined to be

$108,527

and the Company recorded a loss on the change in fair value of the agent warrants of

$26,033

during the

three

and

six

months ended

June 30, 2020.

In connection with the

June 2020

Warrant exercise and issuance, management concluded the warrants and agent warrants issued in connection with the

June 2020

Warrant exercise and issuance, discussed above, are a derivative liability due to certain features of the warrants which could, in certain circumstances, result in the holder receiving the Black Scholes value of the outstanding warrants in the same type of consideration as the common stockholders. As a result, in those circumstances, the amount of consideration would differ from that provided to holders of common stock, therefore, the warrants have been classified as a liability. At inception, the warrants and agent warrants had a fair value of

$1,749,721.

As of

June 30, 2020,

the fair value of the warrants was determined to be

$1,555,653

and as of

June 30, 2020,

the fair value of the agent warrants was determined to be

$105,901

.The Company recorded a gain on the change in fair value of the warrants of

$82,322

during the

three

and

six

months ended

June 30, 2020

and the Company recorded a gain on the change in fair value of the agent warrants of

$5,845

during the

three

and

six

months ended

June 30, 2020.

The table below discloses changes in value of the Company's embedded derivative liabilities related to the bridge loan and the derivative included in the note payable agreements with Dr. Schwartz.

Derivative liability balance at December 31, 2019	$	50,989
Derivative instrument recognized for A, B and Agent Warrants		2,669,995
Derivative instrument related to Promissory Note 2020		120,921
Gain recognized to revalue derivative instrument at fair value		(27,107	)
Derivative liability balance at March 30, 2020	$	2,814,798
Derivative instrument recognized for May 2020 Warrants		1,324,184
Derivative instrument recognized for June 2020 Warrants		1,749,721
Derivative instrument related to Promissory Note 2020		20,542
Reclassification of Warrant liabilities to Equity on exercise		(1,701,756	)
Loss recognized to revalue derivative instrument at fair value		422,081
Derivative liability balance at June 30, 2020	$	4,629,570