NOTE

. Stock

holders’ Equity

(a)

referred Stock

The Company is authorized to issue

5,000,000

shares of preferred stock,

$0.10

par value per share. The Company’s board of directors

may,

without further action by the stockholders, fix the rights, preferences, privileges and restrictions of up to an aggregate of

5,000,000

shares of preferred stock in

one

or more series and authorize their issuance. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which

may

be greater than the rights of the Company’s common stock. The issuance of preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deterring or preventing a change of control or other corporate action.

shares of preferred stock are currently outstanding, and we have

present plan to issue any shares of preferred stock.

(b)

Common Stock

April 23, 2019,

the Company’s stockholders approved a Certificate of Amendment to the Company’s Restated Certificate of Incorporation (the “Certificate”), to decrease the authorized number of shares of common stock, par value

$0.10,

from

200,000,000

100,000,000

shares. On

April 23, 2019,

the Certificate was filed with the Secretary of State of the State of Delaware. Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the holders of common stock possess all voting power for the election of the Company’s directors and all other matters requiring stockholder action. Holders of common stock are entitled to

one

vote per share on matters to be voted on by stockholders. Holders of common stock are entitled to receive such dividends, if any, as

may

be declared from time to time by the Company’s board of directors in its discretion out of funds legally available therefore. In

event will any stock dividends or stock splits or combinations of stock be declared or made on common stock unless the shares of common stock at the time outstanding are treated equally and identically. As of

June 30, 2019

dividends had been declared by the board of directors.

In the event of the Company’s voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up, the holders of the common stock will be entitled to receive an equal amount per share of all of the Company’s assets of whatever kind available for distribution to stockholders, after the rights of the holders of the preferred stock have been satisfied. There are

sinking fund provisions applicable to the common stock.

The Company had shares of common stock reserved for issuance as follows:

	June 30, 2019		December 31, 2018

Options issued and outstanding		2,166,800		865,163
Available for future grants of equity awards		186,410		223,377
Common stock warrants		12,832,188		10,914
Total		15,185,398		1,099,454

(c)

Warrants

The Company has the following warrants outstanding as of

June 30, 2019

, all of which contain standard anti-dilution protections in the event of subsequent rights offerings, stock splits, stock dividends or other extraordinary dividends, or other similar changes in the Company’s common stock or capital structure, and

none

of which have any participating rights for any losses:

Securities into which warrants are convertible	Warrants outstanding	Exercise Price		Expiration Date

Common Stock	1,646,364	$	0.10	April 2024
Common Stock	10,454,546	$	1.10	April 2024
Common Stock	636,364	$	1.375	April 2024
Common Stock	84,000	$	3.125	March 2024
Common Stock	10,914	$	22.99	December 2026
Total	12,832,188

The aggregate fair value at issuance of the warrants entitling the holder to purchase

one

share of common stock for

$3.125

that were issued to the placement agents’ designees at the closing of the

March 2019

Offering (see Note

) was estimated to be

$100,000,

using the Black-Scholes valuation model, using a closing stock price of

$2.08

and assumptions including estimated volatility of

80%,

a risk-free interest rate of

2.34%,

zero

dividend rate and an estimated remaining term of

5.0

years. The aggregate fair value at issuance of the warrants entitling the holder to purchase

one

share of common stock for

$1.375

that were issued to the underwriters’ designees at the closing of the

April 2019

Offering (see Note

) was estimated to be

$333,000,

using the Black-Scholes valuation model, using a closing stock price of

$0.89

and assumptions including estimated volatility of

83%,

a risk-free interest rate of

2.31%,

zero

dividend rate and an estimated remaining term of

5.0

years.

In the event of a Fundamental Transaction (a transfer of ownership of the Company as defined in the warrant) within the Company’s control, the holders of unexercised common stock warrants exercisable for

$1.10

shall be entitled to receive cash consideration equal to a Black-Scholes valuation, as defined in the warrant. If such Fundamental Transaction is

not

within the Company’s control, the warrantholders would only be entitled to receive the same form of consideration (and in the same proportion) as the holders of the Company’s common stock, hence these warrants are classified as a component of permanent equity.