NOTE

13:

STOCK BASED COMPENSATION

Stock Option and Incentive Plan

March

24,

2020,

the Board of Directors approved the adoption of the

2020

Stock Incentive Plan (the

"2020

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

may

be granted under the

2020

Plan after the date that is

years from the date of stockholder approval. An aggregate of

3,000,000

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

2020

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.

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. On

May 16, 2019

the stockholders approved an additional

3,600,000

shares.

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
2020		365,239
Total additional shares		740,021

The Company granted options to purchase

225,000

and

3,140,000

shares of common stock during the

three

and

nine

months ended

September

30,

2020,

respectively, and

and

3,565,000

for the

three

and

nine

months ended

September

30,

2019,

respectively. There were

225,000

options exercised during the

three

and

nine

months ended

September

30,

2020

at an average exercise price of

$2.40

options were exercised during the

three

and

nine

months ended

September

30,

2019.

There are

670,000

shares available for grant under the

2020

Plan as of

September 30, 2020.

Included in the

2020

options granted above, the Company granted the following stock options (the

“2020

Performance Options”) to executives of the Company: (i) to the Chairman of the Board, President and Chief Executive Officer, an option to purchase

1,500,000

shares of Company common stock,

195,000

of which were granted under the Company's

2010

Plan and

1,305,000

of which were granted under the Company's

2020

Plan; and (ii) to the Chief Financial Officer, General Counsel and Secretary, an option to purchase

590,000

shares of Company common stock,

195,000

of which were granted under the

2010

Plan and

395,000

of which were granted under the

2020

Plan.

The

2020

Performance Options have an exercise price equal to fair market value of the Company's common stock on the date of grant which was

$1.48

per share. The

2020

Performance Options vest quarterly over

two

years; however, vesting shall accelerate with respect to

50%

of any unvested options granted under the

2020

Plan upon U.S. Federal Drug Administration ("FDA") approval of certain therapies. The

2020

Performance Options are subject to the option agreements and employment agreements with the executives.

The fair value of the stock options granted for the

nine

months ended

September

30,

2020

and

2019

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

	Period ended September 30,
	2020		2019
Risk-free interest rate		0.28% - 0.47%		2.16% - 2.20%
Expected term	4.50-6.18 years		5.00-5.94 years
Dividend yield		-		-
Expected volatility		103% - 129%		107% - 126%

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

$663,593

and

$2,387,829

for the

three

and

nine

months ended

September

30,

2020,

respectively, and

$751,652

and

$6,346,281

for the

three

and

nine

months ended

September 30, 2019,

respectively, (excluding the liability options discussed below). Compensation cost is recognized in the following captions in the condensed consolidated statements of operations.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
General and administrative	$	489,853	$	510,398	$	1,675,414	$	4,136,727
Research and development		173,740		241,254		712,415		2,209,554
Total stock compensation expense	$	663,593	$	751,652	$	2,387,829	$	6,346,281

Options issued and outstanding as of

September

30,

2020,

under the

2020

and

2010

Plans 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, 2020		4,308,383	$	3.44		-	$	651,000
Granted		3,140,000		1.79		-		449,600
Exercised		(225,000)		2.40		-		297,250
Forfeited		(143,552)		1.87		-		272,000
Expired		-		-		-		-
Outstanding as of September 30, 2020		7,079,831		2.77		8.85	$	5,629,600
Exercisable as of September 30, 2020		4,332,821		3.34		8.42	$	3,616,727
Vested and expected to vest		7,079,831	$	2.77		8.85	$	5,629,600

September

30,

2020,

there were

2,747,010

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

$3,928,067.

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

1.92

years.

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 the 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 cancelled.

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 of these options in the

first

quarter of

2019,

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 for the

three

months ended

March 31, 2019

and the

nine

months ended

September

30,

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 (v) 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 were 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. On

May 16, 2019,

the stockholders approved the Amended Plan and thereby approved the issuance 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 did

not

control enough votes to approve the

2019

Options, the

2019

Options were

not

deemed granted under Accounting Standards Codification ("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, upon cancellation of the Liability Options 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. Shareholder approval was obtained on

May

16,

2019,

which was determined to be the grant date for the

2019

Options, and the Company remeasured and recorded the

2019

Options as a new grant under ASC

718

during the quarter ended

June 30, 2019.

The Company recorded

$4,959,277

in the

second

quarter of

2019

for the

2019

Options granted to the executives.