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 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, 2018,

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
2019		233,862
Total additional shares		374,782

The Company did

not

grant options to purchase shares of common stock during the

three

months ended

March 31, 2019

2018.

options were exercised during the

three

months ended

March 31, 2019

2018.

There are

236,430

shares available for grant under the

2010

Plan as of

March 31, 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

$275,833

and

$215,139

for the

three

months ended

March 31, 2019

and

2018,

respectively (excluding the liability options discussed below).

	Three Months Ended March 31,
	2019		2018
General and administrative	$	224,676	$	166,701
Research and development		51,157		48,438
Total stock compensation Expense	$	275,833	$	215,139

Options issued and outstanding as of

March 31, 2019,

under the

2010

Plan and their activities during the

three

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, 2019		783,383	$	12.14
Granted
Forfeited
Expired
Outstanding as of March 31, 2019		783,383		12.14		8.92	$	695,400
Exercisable as of March 31, 2019		434,515		19.38		8.84	$	374,063
Vested and expected to vest		783,383	$	12.14		8.92	$	695,400

March 31, 2019,

there were

348,868

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

$876,533.

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

1.40

years.

2018

Liability Options

June 27, 2018,

the Company granted

2,300,000

options to the Chief Executive Officer (CEO) and

700,000

to the Chief Financial Officer (CFO) (the "Liability Options"). Each option was exercisable for an equivalent number of shares of Company's common stock. The Liability Options were granted pursuant to an option award agreement and were granted outside the Company’s

2010

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

2010

Plan. On

January 13, 2019,

the Liability Options were canceled.

The Liability Options 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 could

not

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. If there were

not

sufficient shares available under the Plan, 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 Options 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

January 13, 2019,

all of the Liability Options that vested upon achievement of clinical trial milestones were vested. On

January 13, 2019,

the Liability Options were cancelled and at the time of cancellation, there were

1,125,000

unvested Liability Options outstanding.

Compensation costs associated with the Liability Options 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.

At the time of cancellation, the fair value of Liability Options at

January 13, 2019,

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

	January 13,
	2019

Risk free interest rate		2.53	%
Expected term (in years)		4.50-5.00
Stock price	$	1.36
Dividend yield			%
Expected volatility		121.0-123.0	%

As a result of the cancellation, the Company recognized all remaining unrecognized compensation expense related to these options of

$1,741,919,

which was included in the following captions in the condensed consolidated statements of operations:

	Period Ended March 31, 2019

General and administrative	$	1,074,183
Research and development		667,736
Total stock compensation expense	$	1,741,919

Also on

January 13, 2019,

at the same time the Liability Options were cancelled, the Company awarded a new option to the CEO to purchase

2,300,000

shares of Common Stock and a new option to the CFO to purchase

800,000

shares of common stock (the

“2019

Options”). The

2019

Options: (i) have an exercise price equal to the fair market value of Common Stock on the date of board of director approval which was

$1.36

per share, (ii) do

not

contain a net cash exercise provision, (iii) are awarded pursuant to the terms and conditions of the

2010

Plan as amended by the Board of Directors on

January 13, 2019,

to include shares issuable upon exercise of the

2019

Options and other changes to the

2010

Plan so that the

2019

Options do

not

conflict with the

2010

Plan (the “Amended Plan”), (iv) vest and are exercisable in accordance with the vesting schedule related to the

2018

Liability Options; provided, however, that the

2019

Options are

not

exercisable unless and until the Company’s stockholders approve the Amended Plan to increase the authorized number of shares available for grant under the Plan and (vi) are subject to and conditioned upon the

2019

Option Agreements with the optionees and the employment agreements with the optionees.

The above actions were unanimously approved by the disinterested members of the Board of Directors. The above actions are intended to eliminate the Company’s potential liability associated with the net cash exercise provision of the liability options, and to allow the stockholders of the Company the opportunity to vote on the Amended Plan, which includes shares issuable upon exercise of the

2019

Options.

Accounting treatment

Awards offered under a plan that are subject to shareholder approval are

not

considered granted under GAAP until the approval is obtained, unless such approval is essentially a formality (or perfunctory). For example, if management and board members control sufficient votes to approve the plan, the vote

may

be considered perfunctory. As management and the Company’s Board of Directors do

not

control enough votes to approve the

2019

Options, the

2019

Options are

not

deemed granted under ASC

718.

Cancellation of an award that is

not

accompanied by the concurrent grant are accounted for as a repurchase for

consideration. Accordingly, any previously unrecognized compensation cost is recognized at the cancellation date. On

January 13, 2019,

as noted above, the Company recognized

$1,741,919

of unrecognized compensation cost related to the

2018

Liability Options. Additionally, the fair value of the stock-based compensation liability of

$3,151,944

was reclassified to additional-paid in capital on the cancellation date. If shareholder approval is obtained and a grant date is established for the

2019

Options, the Company will measure and record them as a new grant under ASC

718.