NOTE

: 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 stockholder 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		7,257
2017		12,623
2018		106,076
Total additional shares		140,920

The Company granted options to purchase

611,668

and

143,027

shares of common stock to employees and directors during the year ended

December 31, 2018

and

2017,

respectively. The weighted average grant date fair value of options granted during

2018

and

2017

was

$2.02

and

$4.80,

respectively. There are

3,575

options available for grant under the

2010

Plan as of

December 31, 2018,

and as a result of the evergreen provision contained in the

2010

Plan, an additional

233,862

shares were added to the

2010

Plan on

January 1, 2019.

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

$1,053,496

and

$786,550

for the years ended

December 31, 2018

and

2017,

respectively, which was included in the following captions in the consolidated statements of operations.

	Year Ended December 31,
	201 8		201 7

General and administrative	$	809,110	$	621,668
Research and development		244,386		164,882
Total stock compensation expense	$	1,053,496	$	786,550

The fair value of stock options granted for the years ended

December 31, 2018

and

2017,

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

	Year ended December 31,
	201 8			201 7

Risk free interest rate	2.47%	-	2.71%	1.86%	-	2.04%
Expected term (in years)	5.24	-	5.57	5.32	-	6.36

Dividend yield		-%			-%
Expected volatility	108.81%	-	126.43%	112.86%	-	114.19

Options issued and outstanding as of

December 31, 2018,

and their activities during the year 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		(795	)		562.55
Outstanding as of December 31, 2018		783,383			12.14		9.17	$
Exercisable as of December 31, 2018		317,042			24.39		8.97	$
Vested and expected to vest		783,383			12.14		9.17	$

December 31, 2018,

there were

466,341

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

$1,152,367.

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

1.45

years.

Executive Option Grants Classified as Liabilities (

"2018

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's 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. On

January 13, 2019,

the

2018

liability options were canceled.

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

$2.38

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

ten

years from their date of issuance. If at the time the options were exercised the Company cannot deliver shares of common stock to the optionee including, for example, if there were 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 only would be exercised on a cash “net basis” so that the Company would pay cash in an amount equal to the excess of the fair value of the common stock over the option exercise price. There were

not

sufficient shares available under the Plan. Therefore the Company would have been obligated to settle these options in cash if they were exercised. Because these options contained provisions that would require the Company to settle the options in cash in an event outside the Company’s control, they were accounted for as liabilities.

The Liability Grants were subject to vesting requirements. Twenty-

five

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

50%

of the options would have vested quarterly over

two

years, and the remaining

25%

would have vested upon achievement of certain milestones related to clinical trial progress. As of

December 31, 2018,

all of the options that vested upon achievement of clinical trial milestones were vested. At

December 31, 2018,

there were

1,125,000

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

$857,673.

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

1.5

years.

Compensation costs associated with the Liability Grants were 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 were achieved for options that vest based on performance. Compensation cost was remeasured each period based on the market value of our underlying stock until award vesting or settlement.

For the year ended

December 31, 2018,

the Company recognized compensation expense related to these options of

$1,410,025,

which was included in the following captions in the consolidated statements of operations.

	Year Ended December 31, 2018

General and administrative	$	869,515
Research and development		540,510
Total stock compensation expense	$	1,410,025

The fair value of liability options granted for the year ended

December 31, 2018,

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

	Year Ended December 31 , 2018

Risk free interest rate	2.51	-	2.94%
Expected term (in years)	4.5	-	5.0
Stock price	$1.02	-	$2.38
Dividend yield		%
Expected volatility	122.0	-	125.0%

Refer to footnote

for further description.