NOTE

. STOCKHOLDERS’ EQUITY

Equity Financing

June 14, 2017,

the Company completed a concurrent public offering of common stock and private placement of stock purchase warrants to investors, issuing (i)

2,646,091

shares of common stock in the public offering at

$6.875

per share and (ii) stock purchase warrants to purchase

2,646,091

shares of common stock at an exercise price of

$7.50

per share in the private placement, generating total gross proceeds of approximately

$18.2

million. The warrants, exercisable beginning

six

months and

one

day after issuance, have a

-year term and are liability classified due to certain cash settlement provisions.

Stock Options

Following is a summary

of option activities for the years ended

December 31, 2017

and

2016:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding, December 31, 2015		691,374	$	12.44		8.62	$	-

Outstanding, December 31, 2016		691,374	$	12.44		8.62	$	-
Granted		283,372	$	6.75
Options from Dipexium		191,963	$	57.94
Cancelled		-
Outstanding, December 31, 2017		1,166,709	$	18.54		7.84	$	90,097

Exercisable, December 31, 2017		888,124	$	21.71		7.48	$	15,637

The Company

has granted options to employees, directors, advisors, and consultants from

two

current plans – the Old PLx Omnibus Stock Option Plan and the Dipexium

2013

Equity Incentive Plan. On

April 19, 2017,

the Company completed the Merger with Dipexium and Dipexium had

191,963

fully vested options outstanding as of the date of the Merger that continue to be exercisable. At

December 31, 2017,

an aggregate of

242,903

shares of common stock remained available for grant under the

two

plans.

May 12, 2016,

the Company modified certain options previously issued to its executives. After the modification, options to purchase

118,134

common shares originally

scheduled to vest on the closing date of a contemplated initial public offering instead vested on

July 22, 2016.

The modified options had an aggregate fair value of

$948,117,

which was calculated using the Black-Scholes model on the modification day. Variables used in the Black-Scholes model include: (

) discount rate of

1.24%,

(

) expected life of

4.69

years, (

) expected volatility of

83.52%,

and (

)

zero

expected dividends. The Company amortized the entire value during the

second

and

third

quarters of

2016.

During

the year ended

December 31, 2017,

the Company granted total stock options to purchase a total of

283,372

common shares to employees at a weighted average strike price of

$6.75

per share. The options had an aggregate fair value of approximately

$1.3

million, which was calculated using the Black-Scholes model on the grant date. Variables used in the Black-Scholes model include: (

) discount rates of

1.2%

2.1%,

(

) expected lives of

4.7

–

8.0

years, (

) expected volatility of approximately

75%

86%,

and (

)

zero

expected dividends.

As of

December 31, 2017,

the Company had

$1.4

million in unamortized expense related to unvested options which is expected to be expensed over a weighted average of

1.9

years.

The Company modified certain outstanding awards to a former officer upon his termination of employment, and recognized approximately

$150,000

of expense in the

third

quarter

2017

related to such modification.

The Company also recognized approximately

$200,000

in the

third

quarter of

2017

related to an officer’s bonus that was settled in

30,000

shares of common stock.

During the

years ended

December 31, 2017

and

2016,

the Company recorded

$1,624,411

and

$2,471,789,

respectively, in total compensation expense related to the stock options and stock bonuses. For the year ended

December 31, 2017,

$1,623,056

of stock-based compensation expense is classified as general and administrative expenses and

$1,355

is classified as research and development expenses in the accompanying consolidated statements of operations.