NOTE

12:

STOCK BASED COMPENSATION

Stock Option and Incentive Plan

September 28, 2010,

the Board of Directors approved the adoption of the

2010

Stock Option and Incentive Plan the (

“2010

Plan”) to provide for the grant of equity-based awards to employees, officers, non-employee directors and other key persons providing services to the Company. Awards of incentive options

may

be granted under the

2010

Plan until

September 2020.

other awards

may

be granted under the

2010

Plan after the date that is

years from the date of stock-holder approval. An aggregate of

5,556

shares were initially reserved for issuance in connection with awards granted under the

2010

Plan and on

May 18, 2016,

an additional

11,111

shares were reserved for issuance under the

2010

Plan. On

May 9, 2017,

the stockholders approved an additional

125,000

shares for issuance under the

2010

Plan. On

April 12, 2018,

the stockholders approved an additional

500,000

shares for issuance under the

2010

Plan.

The following table presents the automatic additions to the

2010

Plan since inception pursuant to the “evergreen” terms of the

2010

Plan:

January 1,	Number of shares
2012		2,502
2013		2,871
2014		4,128
2015		5,463
2016		18,368
2017		12,623
2018		106,076
Total additional shares		152,031

The Company did

not

grant options to purchase shares of common stock during the

three

months ended

September 30, 2018

2017.

options were exercised during the

three

nine

months ended

September 30, 2018.

There are

3,197

shares available for grant under the

2010

Plan as of

September 30, 2018.

Compensation costs associated with the Company’s stock options are recognized, based on the grant-date fair values of these options, over the requisite service period, or vesting period. Accordingly, the Company recognized stock-based compensation expense of

$332,063

and

$224,254

for the

three

months ended

September 30, 2018

and

2017,

respectively and

$726,252

and

$560,369

for the

nine

months ended

September 30, 2018

and

2017,

respectively (excluding the liability options discussed below).

Options issued and outstanding as of

September 30, 2018

under the

2010

Plan and their activities during the

nine

months then ended are as follows:

	Number of Underlying Shares			Weighted- Average Exercise Price Per Share		Weighted- Average Contractual Life Remaining in Years		Aggregate Intrinsic Value
Outstanding as of January 1, 2018		172,510		$	49.27			$
Granted		611,668			2.39
Forfeited		(417	)		5.64
Expired
Outstanding as of September 30, 2018		783,761			12.70		9.42	$
Exercisable as of September 30, 2018		199,949			40.62		8.95	$
Vested and expected to vest		783,761			12.70		9.42	$

September 30, 2018,

there were

583,812

unvested options outstanding and the related unrecognized total compensation cost associated with these options was approximately

$1,479,610.

This expense is expected to be recognized over a weighted-average period of

1.56

years.

Option Grants Classified as Liabilities (“Liability Grants”)

June 27, 2018,

the Company granted

2,300,000

options to the Chief Executive Officer and

700,000

to the Chief Financial Officer. Each option is exercisable for an equivalent number of shares of Company common stock. The options were granted pursuant to an option award agreement and were granted outside the Company’s

2010

Plan; however, they are subject to the terms and conditions of the

2010

Plan.

The Liability Grants are exercisable for shares of common stock at an exercise price of

$2.38

per share, which was the fair market value on the date of grant. The options have an exercise period of

ten

years from their date of issuance. If at the time the options are exercised the Company cannot deliver shares of common stock to the optionee including, for example, if there are insufficient shares available under the Plan at the time of exercise, then in lieu of the optionee paying the exercise price and the Company issuing shares of stock, the option

may

only be exercised on a cash “net basis” so that the Company will pay cash in an amount equal to the excess of the fair market value of the common stock over the option exercise price. There currently are

not

sufficient shares available under the Plan and the Company would be obligated to settle these options in cash if they were exercised. Because these options contain provisions that could require the Company to settle the options in cash in an event outside the Company’s control, they are accounted for as liabilities.

The Liability Grants are subject to vesting requirements. Twenty-

five

percent of the options have vested as of the grant date,

50%

of the options will vest quarterly over

two

years, and the remaining

25%

vest upon achievement of certain milestones related to clinical trial progress. As of

September 30 2018,

80%

of the options that vest upon achievement of clinical trial milestones are vested.

Compensation costs associated with the Liability Grants are initially recognized, based on the grant-date fair values of these options, over the requisite or vesting period for time-based options or when it is probable the performance criteria will be achieved for options that vest based on performance. Compensation cost is remeasured each period based on the market value of our underlying stock until award vesting or settlement.

For the

three

and

nine

months ended

September 30, 2018,

the Company recognized compensation expense related to these options of

$623,496

and

$2,180,659,

respectively.

The fair value of liability options granted for the

nine

months ended

September 30, 2018

was calculated using the Black-Scholes option-pricing model applying the following assumptions:

	Nine months ended September 30,
	2018

Risk free interest rate	2.94	%
Expected term (in years)	4.75
Stock price	$1.75
Dividend yield		%
Expected volatility	122.0	%