NOTE

: STOCKHOLDERS’ EQUITY

The Company is authorized to issue a total of

185,000,000

shares of stock consisting of

175,000,000

shares of common stock, par value

$0.18

per share, and

10,000,000

shares of preferred stock, par value

$0.001

per share. The Company has designated

750,000

shares of Series A junior participating preferred stock, par value

$0.001

per share,

4,000

shares of Series A convertible preferred stock, par value

$0.001

per share, and

25,000

shares of Series B convertible preferred stock, par value

$0.001

per share, through the filings of certificates of designation with the Delaware Secretary of State.

shares of Series A junior participating preferred stock or Series A convertible preferred stock are issued or outstanding as of

December 31, 2018.

May 19, 2014,

the Company adopted a stockholder rights agreement which provides that all stockholders of record on

May 26, 2014,

received a non-taxable distribution of

one

preferred stock purchase right for each share of the Company’s common stock held by such stockholder. Each right is attached to and trades with the associated share of common stock. The rights will become exercisable only if

one

of the following occurs: (

) a person becomes an “Acquiring Person” by acquiring beneficial ownership of

15%

or more of the Company’s common stock (or, in the case of a person who beneficially owned

15%

or more of the Company’s common stock on the date the stockholder rights agreement was executed, by acquiring beneficial ownership of additional shares representing

2.0%

of the Company’s common stock then outstanding (excluding compensatory arrangements)), or (

) a person commences a tender offer that, if consummated, would result in such person becoming an Acquiring Person. If a person becomes an Acquiring Person, each right will entitle the holder, other than the Acquiring Person and certain related parties, to purchase a number of shares of the Company’s common stock with a market value that equals twice the exercise price of the right. The initial exercise price of each right is

$15.00,

so each holder (other than the Acquiring Person and certain related parties) exercising a right would be entitled to receive

$30.00

worth of the Company’s common stock. If the Company is acquired in a merger or similar business combination transaction at any time after a person has become an Acquiring Person, each holder of a right (other than the Acquiring Person and certain related parties) will be entitled to purchase a similar amount of stock of the acquiring entity.

2017

Public Offering of Class A and Class B Units Consisting of Common Stock, Series A Convertible Preferred Stock and Warrants

March 28, 2017,

the Company entered into an underwriting agreement with Aegis Capital Corp. relating to a public offering which closed on

April 3, 2017.

The offering generated gross proceeds to the Company of approximately

$4.4

million and net proceeds of approximately

$3.9

million after deducting underwriting discounts and commissions and other offering expenses paid by the Company.

The offering included

55,333

Class A Units at a public offering price of

$9.00

per Class A Unit, which consisted of

55,333

shares of common stock and warrants to purchase

55,333

shares of common stock. The offering also included

292

Class B Units at a public offering price of

$12,000

per Class B Unit, which consisted of

292

shares of Series A convertible preferred stock convertible into a total of

389,111

shares of common stock and warrants to purchase

389,111

shares of common stock. In addition, the underwriter exercised the over-allotment option to purchase an additional

44,167

shares of common stock and warrants to purchase

44,167

shares of common stock, which are included in the gross proceeds of

$4.4

million. The warrants had a per share exercise price of

$11.25,

were exercisable immediately and were scheduled to expire

five

years from the date of issuance.

As of

December 31, 2017,

all of the warrants issued in the

April 3, 2017

offering have been exercised and are

longer outstanding and all of the shares of Series A convertible preferred stock have been converted into shares of common stock.

Accounting Treatment

The Company allocated the proceeds from the sale of the Class A and Class B units to the separate securities issued. The Company determined that, on the date of issuance, the warrants were

not

indexed to its stock because they did

not

meet the “fixed-for-fixed” criterion due to the price protection and fundamental transaction provisions and, therefore, the warrants were accounted for as liabilities with changes in fair value recorded in non-operating income (expense) in the consolidated statement of operations.

The Company allocated the amount representing the fair value of the warrants at the date of issuance separately to the warrant liability and recorded the remaining proceeds as common stock, in the case of the Class A units, or as Series A convertible preferred stock, in the case of the Class B units. Due to the allocation of a portion of the proceeds to the warrants, the Series A convertible preferred stock contained a beneficial conversion feature upon issuance, which was recorded in the amount of

$1,284,066

based on the intrinsic value of the beneficial conversion feature. The discount on the Series A convertible preferred stock of

$1,284,066

caused by allocation of the proceeds to the warrant was recorded as a deemed dividend upon issuance of the Series A convertible preferred stock. As a result, total deemed dividends of

$2,568,132

were recorded upon issuance of the Series A convertible preferred stock, which is reflected as an addition to net loss in the consolidated statement of operations to arrive at net loss applicable to common shareholders.

Exercise of

2017

Warrants

June 29, 2017,

the Company offered to modify the rights of the holders of the warrants issued in the public offering the Company completed on

April 3, 2017.

The temporary modification included (a) lowering the exercise price of the warrants to

$3.12

per share, (b) setting the applicable volume-weighted average price (VWAP) at

$6.24

per share, and (c) allowing for temporary cashless exercise of the warrants for all holders that accepted the temporary modification before

8:00

a.m. Eastern daylight time on

June 30, 2017.

Holders of warrants to purchase a total of approximately

250,000

shares of common stock accepted the offer resulting in the cancellation of those warrants and the issuance by the Company of a total of approximately

125,000

of common stock (including shares held in abeyance). The shares of common stock are registered under the Securities Act of

1933,

as amended. In connection with the temporary modification, the Company agreed to extend the “Lock-up Period” of the underwriting agreement between the Company and Aegis Capital Corp., dated

March 28, 2017,

days and the Company agreed

not

to enter into any further amendments to the warrants during such extended Lock-up Period without the prior written consent of each holder. During the

third

quarter of

2017,

all remaining warrants were exercised for cash so that

warrants issued in the

April 3, 2017,

financing remained outstanding. Upon exercise of these warrants, the amount of the warrant liability at the date of exercise was reclassified from warrant liability to additional paid-in capital.

The following table summarizes the

2017

liability warrant activity:

	Shares			Weighted Average Exercise Price
Outstanding as of January 1, 2017
Warrants granted		488,611		$	11.25
Warrants exercised		(488,611	)		3.12
Outstanding as of December 31, 2017

The Company estimated the fair value of the warrants using the Monte Carlo simulation (MCS) model, which is a type of income approach, where the current value of an asset is expressed as the sum of probable future cash flows across various scenarios and time frames discounted for risk and time. The significant assumptions included timing of future rounds of financing, timing and success rates of oncology clinical trials, and the probability of a merger and acquisition adjusted for a lack of marketability discount. The MCS model also included a full term and an early conversion scenario that were each weighted at

50%

in the final concluded fair value.

Inputs used in the valuation of the warrants at the issuance date of

April 3, 2017

and

June 30, 2017,

are set forth below. All of the warrants issued in the

April 2017

financing were exercised during

2017

and

none

remained outstanding at

December 31, 2017.

Initial valuation
Common stock price		$9.00
Exercise price		$11.25
Expected volatility		50%
Dividend yield		0%
Risk-free interest rate	0.79%	-	1.88%
Expected term (in years)	0.24	-	5

June 30, 2017 valuation
Common stock price		$6.00
Exercise price		$3.12
Expected volatility		50%
Dividend yield		0%
Risk-free interest rate	0.79	-	1.88%
Expected term (in years)	0.08	-	4.76

Conversion of Series A Convertible Preferred Stock

During the year ended

December 31, 2017,

certain holders of the Series A convertible preferred stock exercised their conversion option and converted an aggregate of

292

shares of Series A convertible preferred stock into

389,111

shares of the Company’s common stock based on the conversion ratio of

111

shares of common stock for each share of Series A convertible preferred stock. As of

December 31, 2017

and

2018,

shares of Series A convertible preferred stock were outstanding.

October 2017

Public Offering

October 26, 2017,

the Company entered into an underwriting agreement with Maxim Group LLC relating to a public offering of common stock which closed on

October 30, 2017.

The offering generated gross proceeds to the Company of approximately

$5.5

million and net proceeds of

$4.9

million after deducting underwriting discounts, commissions and other offering expenses paid by the Company.

The offering included

958,333

shares of common stock at a public offering price of

$5.28

per share. In addition, the underwriter exercised the over-allotment option to purchase an additional

83,333

shares of common stock at the offering price of

$5.28

per share, which are included in the gross proceeds of

$5.5

million.

December 2017

Public Offering and Private Placement

December 20, 2017,

the Company entered into a placement agent agreement with Maxim Group LLC relating to the sale of the Company’s securities. Pursuant to the placement agent agreement, on

December 20, 2017,

the Company entered into a securities purchase agreement with certain purchasers named therein relating to the offering and sale of

441,667

shares of Company common stock at a public offering price of

$3.24

per share. The offering generated gross proceeds to the Company of approximately

$1.4

million and net proceeds of

$1.2

million after deduction of underwriting discounts, commissions, and other offering expenses paid by the Company.

Concurrently with the public offering the Company also commenced a private placement whereby it issued and sold Class A and Class B Warrants, exercisable for an aggregate of

883,333

shares of common stock, at an exercise price of

$3.78

per share. The public offering and the private placement involved the same purchasers. The Class A and Class B Warrants exercise price was fixed at

$3.78

per warrant, and the warrants became exercisable commencing

six

months from issuance. The Class A Warrants and Class B Warrants expired on the

first

anniversary of the date of issuance.

None

of the Class A Warrants, the Class B Warrants nor the shares issuable upon exercise of such Warrants were registered with the Securities and Exchange Commission. The Warrants could

not

be exercised on a cashless basis. There were

redemption features embodied in the Warrants and they met the conditions for equity classification. On

December 22, 2018,

the Class A and Class B warrants expired unexercised.

2018

Subscription Rights Offering of Units Consisting of Series B Convertible Preferred Stock and Warrants

May 9, 2018,

the Company’s Registration Statement on Form S-

with the Securities and Exchange Commission was declared effective to offer subscription rights to purchase up to

25,000

units at

$1,000

per unit with each unit consisting of

one

share of Series B convertible preferred stock and warrants to purchase

284

shares of common stock.

May 29, 2018,

the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series B convertible preferred stock with the Delaware Secretary of State creating a new series of its authorized preferred stock, par value

$0.001

per share, designated as the Series B convertible preferred stock. The number of shares initially constituting the Series B preferred stock was set at

25,000

shares.

May 30, 2018,

the Company completed its previously announced rights offering pursuant to which the Company sold an aggregate of

13,624

units consisting of an aggregate of

13,624

shares of Series B convertible preferred stock and

3,869,216

warrants, with each warrant exercisable for

one

share of common stock at an exercise price of

$4.048

per share (the

“2018

Warrants”), resulting in net proceeds to the Company of approximately

$12.3

million, after deducting expenses relating to the rights offering, including dealer-manager fees and expenses, and excluding any proceeds received upon exercise of any warrants.

Series B Convertible Preferred Stock

The terms and provisions of our Series B convertible preferred stock are:

Conversion.

Each share of Series B convertible preferred stock is convertible at our option at any time on or after the

first

anniversary of the closing of the rights offering or at the option of the holder at any time, into the number of shares of our common stock determined by dividing the

$1,000

stated value per share of the Series B convertible preferred stock by a conversion price of

$3.52

per share. In addition, the conversion price per share is subject to adjustment for stock dividends, distributions, subdivisions, combinations or reclassifications. Subject to limited exceptions, a holder of the Series B convertible preferred stock will

not

have the right to convert any portion of the Series B convertible preferred stock to the extent that, after giving effect to the conversion, the holder, together with its affiliates, would beneficially own in excess of

9.99%

of the number of shares of our common stock outstanding immediately after giving effect to its conversion.

Fundamental Transactions.

In the event we effect certain mergers, consolidations, sales of substantially all of our assets, tender or exchange offers, reclassifications or share exchanges in which our common stock is effectively converted into or exchanged for other securities, cash or property, we consummate a business combination in which another person acquires

50%

of the outstanding shares of our common stock, or any person or group becomes the beneficial owner of

50%

of the aggregate ordinary voting power represented by our issued and outstanding common stock, then, upon any subsequent conversion of the Series B convertible preferred stock, the holders of the Series B convertible preferred stock will have the right to receive any shares of the acquiring corporation or other consideration it would have been entitled to receive if it had been a holder of the number of shares of common stock then issuable upon conversion in full of the Series B convertible preferred stock.

Dividends.

Holders of Series B convertible preferred stock shall be entitled to receive dividends (on an as-if-converted-to-common-stock basis) in the same form as dividends actually paid on shares of the common stock when, as and if such dividends are paid on shares of common stock.

Voting Rights.

Except as otherwise provided in the certificate of designation or as otherwise required by law, the Series B convertible preferred stock has

voting rights.

Liquidation Preference

Upon our liquidation, dissolution or winding-up, whether voluntary or involuntary, holders of Series B convertible preferred stock will be entitled to receive out of our assets, whether capital or surplus, the same amount that a holder of common stock would receive if the Series B convertible preferred stock were fully converted (disregarding for such purpose any conversion limitations under the certificate of designation) to common stock, which amounts shall be paid pari passu with all holders of common stock.

Redemption Rights.

We are

not

obligated to redeem or repurchase any shares of Series B convertible preferred stock. Shares of Series B convertible preferred stock are

not

otherwise entitled to any redemption rights, or mandatory sinking fund or analogous provisions.

2018

Warrants

The terms and conditions of the warrants included in the

2018

rights offering are as follows:

Exercisability

. Each warrant is exercisable at any time and will expire

four

years from the date of issuance. The warrants are exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and payment in full for the number of shares of our common stock purchased upon such exercise, except in the case of a cashless exercise as discussed below.

The number of shares of common stock issuable upon exercise of the warrants is subject to adjustment in certain circumstances, including a stock split of, stock dividend on, or a subdivision, combination or recapitalization of the common stock. Upon the merger, consolidation, sale of substantially all of our assets, or other similar transaction, the holders of warrants shall, at the option of the company, be required to exercise the warrants immediately prior to the closing of the transaction, or such warrants shall automatically expire. Upon such exercise, the holders of warrants shall participate on the same basis as the holders of common stock in connection with the transaction.

Cashless Exercise

. If at any time there is

effective registration statement registering, or the prospectus contained therein is

not

available for issuance of, the shares issuable upon exercise of the warrant, the holder

may

exercise the warrant on a cashless basis. When exercised on a cashless basis, a portion of the warrant is cancelled in payment of the purchase price payable in respect of the number of shares of our common stock purchasable upon such exercise.

Exercise Price

. Each warrant represents the right to purchase

one

share of common stock at an exercise price of

$4.048

per share. In addition, the exercise price per share is subject to adjustment for stock dividends, distributions, subdivisions, combinations, or reclassifications, and for certain dilutive issuances. Subject to limited exceptions, a holder of warrants will

not

have the right to exercise any portion of the warrant to the extent that, after giving effect to the exercise, the holder, together with its affiliates, and any other person acting as a group together with the holder or any of its affiliates, would beneficially own in excess of

4.99%

of the number of shares of our common stock outstanding immediately after giving effect to its exercise. The holder, upon notice to the Company,

may

increase or decrease the beneficial ownership limitation provisions of the warrant, provided that in

event shall the limitation exceed

9.99%

of the number of shares of our common stock outstanding immediately after giving effect to the exercise of the warrant.

Transferability

. Subject to applicable laws and restrictions, a holder

may

transfer a warrant upon surrender of the warrant to us with a completed and signed assignment in the form attached to the warrant. The transferring holder will be responsible for any tax that liability that

may

arise as a result of the transfer.

Exchange Listing

. We do

not

intend to apply to list the warrants on any securities exchange or recognized trading system.

Rights as Stockholder

. Except as set forth in the warrant, the holder of a warrant, solely in such holder’s capacity as a holder of a warrant, will

not

be entitled to vote, to receive dividends, or to any of the other rights of our stockholders.

Redemption Rights

. We

may

redeem the warrants for

$0.18

per warrant if the volume-weighted-average-price of our common stock equals or exceeds

$10.56

per share for

ten

consecutive trading days, provided that we

may

not

do so prior to the

first

anniversary of closing of the rights offering.

Accounting Treatment

The Company allocated the proceeds from the sale of the Series B convertible preferred stock and the warrants to purchase common stock to the separate securities issued. The Company allocated the amount representing the fair value of the warrants at the date of issuance to common stock based on the relative warrant fair value in the amount of

$5,363,759,

which is net of issuance costs allocated to the warrants. Due to the allocation of a portion of the proceeds to the warrants, the convertible preferred stock contained a beneficial conversion feature upon issuance, which was recorded in the amount of

$4,782,100

based on the relative fair value of the beneficial conversion feature. The discount on the convertible preferred stock was

$11,479,308,

which consists of the beneficial conversion feature of

$4,782,100,

the allocation of a portion of the proceeds to the warrants in the amount of

$5,363,759,

and the total issuance costs related to the financing of

$1,333,449.

The discount on the convertible preferred stock of

$11,479,308

was recorded as a deemed dividend upon issuance of the convertible preferred stock. The deemed dividend is reflected as an addition to net loss in the consolidated statements of operations to arrive at net loss applicable to common shareholders. The Company has made an accounting policy election to record the deemed dividend related to discounts on convertible instruments at the time of issuance of the convertible instruments.

Outstanding Warrants

As of

December 31, 2018,

warrants to purchase

3,875,699

shares of common stock were outstanding including:

	Outstanding Warrants to Purchase Shares		Exercise Price		Expiration Date

2014 public offering		6,483	$	540.00	January 29, 2019
2018 warrants		3,869,216		4.05	May 30, 2022
		3,875,699

Conversion of Series B Convertible Preferred Stock

During the year ended

December 31, 2018,

certain holders of the Series B convertible preferred stock exercised their conversion option and converted an aggregate of

11,245

shares into

3,194,600

shares of the Company's common stock based on the conversion ratio of approximately

284

shares of common stock for each share of Series B convertible preferred stock.