NOTE

STOCKHOLDERS’ EQUITY

Common Stock

Equity Distribution Agreement

March 2019,

the Company entered into an equity distribution agreement with JMP Securities, Inc. (“JMP”). Pursuant to the terms of the agreement, the Company

may

sell from time to time, at its option, shares of the Company’s common stock, through JMP, as sales agent, with an aggregate sales price of up to

$12.5

million. Any sales of shares pursuant to the agreement will be made under the Company’s effective “shelf” registration statement, which allows it to sell debt or equity securities in

one

or more offerings up to a total public offering price of

$75

million. In

2019,

the Company issued

398,709

shares under the agreement generating gross proceeds of

$2.3

million and net proceeds of

$2.1

million after deducting legal and commission costs. As of

December 31, 2019,

approximately

$10.2

million remained available under the agreement.

Convertible

Series A

Preferred Stock

December 2018,

the Company entered into a purchase agreement with certain accredited investors for the private placement of

$15.0

million of Series A Convertible Preferred Stock, par value

$0.001

per share (the “Series A Preferred Stock”) pending stockholders' approval, which approval was subsequently obtained on

February 19, 2019.

Accordingly, the Company completed the private placement on

February 20, 2019,

raising

$15.0

million through the issuance of

15,000

shares of Series A Preferred Stock. The Series A Preferred Stock was issued at

$1,000

per share and is convertible into common shares at a conversion price of

$2.60

per share, subject to certain adjustments. Holders of the Series A Preferred Stock will be entitled to an initial dividend rate of

8.0%

per annum, which will stop accruing on the date of the FDA’s approval of the supplemental sNDA of VAZALORE

325

mg and VAZALORE

81mg.

The dividends are compounded quarterly and payable in cash or shares of Series A Preferred Stock at the Company’s option. The Series A Preferred Stock carries a liquidation preference equal to its stated value of

$1,000

plus accrued and unpaid dividends.

The Series A Preferred Stock is classified as temporary equity due to the presence of certain contingent cash redemption features. As a result of the excess value of the Company’s common stock on the issuance date over the conversion price of the Series A Preferred Stock, a beneficial conversion feature in the amount of

$12.7

million was bifurcated from the host instrument and accounted for separately as an increase in additional paid-in capital in equity, and resulted in a deemed dividend during the year ended

December 31, 2019

$12.7

million which was accounted for as a decrease in additional paid-in capital in equity due to the Company’s accumulated deficit position. At

December 31, 2019,

the carrying value of the temporary equity was

$13.7

million, net of

$1.3

million in offering costs.

The Company recognized

$1.1

million (or

$70.57

per share of Series A Preferred Stock) of total dividends on the Series A Preferred Stock during the year ended

December 31, 2019.

dividends were recognized on common stock during any of the periods presented.

Warrants

In connection with a

June 2017

equity transaction, the Company issued stock purchase warrants to purchase

2,646,091

shares of common stock at an exercise price of

$7.50

per share. The warrants, exercisable beginning

six

months and

one

day after issuance, have a

-year term and are liability classified due the holders’ right to require the Company to repurchase the warrants for cash upon certain deferred fundamental transactions. See Note

for the fair value measurement of the warrant liability.

In connection with entry into the Term Loan Facility, the Company issued to SVB and

one

of its affiliates, warrants to purchase an aggregate of

58,502

shares of the Company’s common stock at an exercise price of

$6.41

per share (see Note

). These warrants are immediately exercisable, have a

-year term, contain a cashless exercise provision, and are classified in equity.

Stock Options

Following is a summary of option activities for the years ended

December 31, 2019

and

2018:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding, December 31, 2017		1,166,709		$	18.54		7.84	$	90,097
Granted		85,000		$	3.46
Cancelled		(45,000	)	$	6.55
Outstanding, December 31, 2018		1,206,709		$	17.93		6.97	$	-
Granted		714,350		$	5.76
Cancelled		(254,262	)	$	9.78
Outstanding, December 31, 2019		1,666,797		$	13.96		7.22	$	91,475

Exercisable, December 31, 2019		928,780		$	20.59		5.73	$	30,491

September 13, 2018,

the Company’s stockholders approved the

2018

Incentive Plan (the

“2018

Plan”). The

2018

Plan provides that the Company

may

grant equity interests to employees, consultants and members of the Board of Directors in the form of incentive and nonqualified stock options, restricted stock and restricted stock units, stock appreciation rights and various other forms of stock-based awards. There are

1,250,000

shares authorized to be issued pursuant to the

2018

Plan. As of

December 31, 2019,

598,650

shares are available for issuance under the

2018

Plan.

Prior to the approval of the

2018

Plan, the Company granted options to employees, directors, advisors, and consultants from

two

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

2013

Equity Incentive Plan (the “Prior Plans”). Upon the adoption of the

2018

Plan, the Prior Plans were frozen, and

new awards can be issued pursuant to the Prior Plans. The Company is

longer authorized to grant awards under these

two

plans.

The Company granted

714,350

options during the year ended

December 31, 2019

with an aggregate fair value of

$2.9

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

) discount rate range from

1.9%

2.5%,

(

) expected life of

6.0

years, (

) expected volatility of

82%,

and (

)

zero

expected dividends.

The Company granted

85,000

options during the year ended

December 31, 2018

with an aggregate fair value of

$207,537

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

) discount rate of

2.6%

2.8%,

(

) expected life of

6.0

years, (

) expected volatility of

76%

82%,

and (

)

zero

expected dividends.

As of

December 31, 2019,

the Company had

$2.2

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

2.1

years.

During the years ended

December 31, 2019

and

2018,

the Company recorded

$875,851

and

$841,421,

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

December 31, 2019,

$872,244

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

$3,607

was classified as research and development expenses in the accompanying consolidated statement of operations. For the year ended

December 31, 2018,

$827,466

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

$13,955

was classified as research and development expenses in the accompanying consolidated statement of operations.