Note

Stockholders’ Equity

We have granted share-based compensation awards to employees, board members and service providers. Awards

may

consist of common stock, restricted common stock, restricted common stock units, common stock purchase warrants, or common stock options. Our stock options and stock purchase warrants have lives of up to

ten

years from the grant date. Awards vest either upon the grant date or over varying periods of time. The stock options provide for exercise prices equal to or greater than the fair value of the common stock at the date of the grant. Restricted stock units grant the holder the right to receive fully paid common shares with various restrictions on the holder’s ability to transfer the shares. As of

December 31, 2017,

we have approximately

6.9

million shares of common stock reserved for issuance upon the exercise of such awards.

We record share-based compensation expense on a straight-line basis over the requisite service period. Share-based compensation expense included in the statements of operations was as follows:

	Year Ended December 31,
	2017		2016

Research and development costs	$	1,091,036	$	1,767,732
General and administrative expenses		678,928		1,677,807
Total	$	1,769,964	$	3,445,539

Included in the general and administrative expense for the year ended

December 31, 2016

is approximately

$407,000

related to the acceleration of the vesting of options for the previous CEO whose employment was terminated during the

first

quarter of

2016.

In addition, approximately

$42,000

and

$15,000

is included in research and development and general and administrative expenses, respectively for the year ended

December 31, 2016

related to the modification of certain awards in conjunction with our corporate reorganization.

Stock Options

A summary of stock option activity and related information for the year ended

December 31, 2017

follows:

	Number of Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value

Outstanding at January 1, 2017		1,691,987		$	22.60		5.1	$	-
Granted		246,982		$	1.92
Exercised		-			-
Forfeited/Expired		(44,892	)	$	28.67
Outstanding at December 31, 2017		1,894,077		$	19.76		4.7	$	108,000

Exercisable at December 31, 2017		1,576,364		$	22.92		3.8	$	-

Range of Exercise Prices			Number of Options Outstanding		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
$1.00	-	$3.50		200,000	$	1.18		9.8	$	108,000
$3.51	-	$13.00		758,917	$	9.42		6.2		-
$13.01	-	$26.00		369,830	$	15.26		3.9		-
$26.01	-	$39.00		147,445	$	32.46		1.7		-
$39.01	-	$56.00		417,885	$	46.96		1.4		-
				1,894,077	$	19.76		4.7	$	108,000

The Company uses the Black-Scholes option pricing model for “plain vanilla” options and other pricing models as appropriate to calculate the fair value of options. Significant assumptions used in these models include:

	Year Ended December 31,
	2017			2016

Annual dividend		-			-
Expected life (in years)	0.3	-	6.5	5.8	-	7.3
Risk free interest rate	0.80%	-	2.22%	1.34%	-	1.75%
Expected volatility	62.2%	-	98.0%	69.0%	-	80.2%

The Company estimates the expected term using the "simplified-method" as it does

not

have sufficient historical exercise data to provide a reasonable estimate.

Options granted in the years ended

December 31, 2017

and

2016

had weighted average grant date fair values of

$1.34

and

$5.18,

respectively. The total fair value of the options vested during the years ended

December 31, 2017

and

2016

was approximately

$302,000

and

$2,643,000,

respectively.

Unrecognized compensation cost for unvested stock option awards outstanding at

December 31, 2017

was approximately

$926,000

to be recognized over approximately

1.8

years.

RSUs

We have granted restricted stock units (RSUs) that entitle the holders to receive shares of our common stock upon vesting and subject to certain restrictions regarding the exercise of the RSUs and the holders’ ability to transfer the shares received upon exercise. The fair value of RSUs granted is based upon the market price of the underlying common stock as if they were vested and issued on the date of grant.

A summary of our RSU activity for the year ended

December 31, 2017

follows:

	Number of RSU's			Weighted-Average Grant Date Fair Value

Outstanding at January 1, 2017		6,863		$	30.70
Granted		9,311		$	5.37
Exercised and converted to common shares		(4,939	)	$	25.99
Forfeited		-		$	-
Outstanding at December 31, 2017		11,235		$	11.77

Exercisable at December 31, 2017		6,580		$	16.30

The total fair value of the shares vested during the year ended

December 2017,

was approximately

$25,000.

RSU’s were granted or vested during

2016.

The total intrinsic value of the outstanding restricted stock units at

December 31, 2017

was approximately

$19,000.

The total value of all restricted stock units that were converted in the year ended

December 31, 2017

was approximately

$23,000.

Restricted Stock

We have granted restricted stock to certain board members.

A summary of our restricted stock activity for the year ended

December 31, 2017

is as follows:

	Shares of Restricted Stock			Weighted-Average Grant Date Fair Value

Outstanding at January 1, 2017		-		$	-
Granted		79,829		$	3.33
Vested		(29,869	)	$	3.88
Forfeited		-		$	-
Outstanding at December 31, 2017		49,960		$	3.00

The total intrinsic value of the outstanding restricted stock at

December 31, 2017

was approximately

$86,000.

The total intrinsic value of all restricted stock vested in the year ended

December 31, 2017

was approximately

$47,000.

Stock Purchase Warrants

We have issued warrants to purchase common stock to certain officers, directors, stockholders and service providers as well as in conjunction with debt and equity offerings and at various times replacement warrants were issued as an inducement for warrant exercises.

May 2016,

we issued

1,746,173

common stock purchase warrants in conjunction with our capital raising transactions. Such warrants were classified as liabilities due to the existence of non-standard anti-dilution and certain other conditions contained in the warrants. At

December 31, 2017,

after giving effect of exercises,

732,709

remain outstanding and are recorded at fair value as mark-to-market liabilities (see Note

March 2017,

we entered into a letter agreement with an investor pursuant to which the investor agreed to exercise certain of their warrants to purchase

692,309

shares of the Company’s common stock; such warrants were originally issued on

May 6, 2016

in the Company’s registered offering and contained a current exercise price of

$3.25

per share. In exchange for and to induce the investor to exercise the warrants, we issued to the investors inducement warrants to purchase

230,771

shares of the Company’s common stock.

The inducement warrants are exercisable through

March 20, 2018

at an exercise price equal to

$5.80

per share, and contain provisions providing for an adjustment in the underlying number of shares and exercise price in the event of stock splits or dividends, subsequent rights offerings, pro rata distributions, and fundamental transactions. In the event that the shares underlying the inducement warrants are

not

subject to an effective registration statement at the time of exercise, the inducement warrants

may

be exercised on a cashless basis at any time after

six

(

) months from the issuance date. The inducement warrants are classified in equity. The fair value of the inducement warrants of

$476,084

was expensed as inducement expense in the accompanying consolidated statement of operations for the year ended

December 31, 2017.

April 2017,

we executed a similar agreement with a different investor pursuant to which the investor agreed to exercise certain of their stock purchase warrants to purchase

153,847

shares of the Company’s common stock; such warrants were originally issued on

May 6, 2016

in the Company’s registered offering and contained a current exercise price of

$3.25

per share. In exchange for and to induce the investor to exercise the warrants, we issued to the investors an inducement stock purchase warrant to purchase

51,283

shares of the Company common stock at

$5.80

per share (the “Inducement Warrants”). The terms of the Inducement Warrants issued in

April 2017

are substantially similar to the terms of the Inducement Warrants issued in

March 2017

and are classified in equity. The fair value of the Inducement Warrants of

$87,660

was expensed as inducement expense in the accompanying consolidated statement of operations for the year ended

December 31, 2017.

August 2017,

we issued

2,250,000

common stock purchase warrants in conjunction with our capital raise transaction. Such warrants are classified as liabilities due to the existence of certain net cash settlement provisions and certain other conditions contained in the warrants. The warrants are recorded at fair value as mark-to-market liabilities (see Note

A summary of outstanding warrants at

December 31, 2017

follows:

Range of Exercise Prices				Number of Warrants Outstanding		Range of Expiration Dates
	$2.00	-	$3.90		2,994,248		May 2021 - August 2024
	$5.79	-	$5.80		293,593		March 2018 - July 2022
	$12.80	-	$12.90		39,296		January 2022
	$16.20	-	$16.30		174,544		March 2020
	$18.60	-	$19.80		12,309		March 2018 - June 2018
	$22.10	-	$27.90		153,755		March 2019 - January 2021
	$34.50	-	$39.00		159,639		August 2018 - October 2019
	$39.10	-	$39.20		230,772		October 2020 - October 2021
	$47.30	-	$52.20		275,897		January 2019 - July 2019
					4,334,053

Preferred and Common Stock

We have outstanding

1,000,000

shares of Series A

4.5%

Convertible Preferred Stock which were initially issued in

December 2016.

Shares of the Series A

4.5%

Convertible Preferred Stock are convertible into

3,887,387

shares of the Company’s common stock subject to certain ownership restrictions.

March

and

April 2017,

we issued

846,156

shares of our common stock upon the exercise of certain outstanding common stock purchase warrants. The warrants were exercised at

$3.25

per share and we received approximately

$2,700,000

in net proceeds. The exercises were pursuant to an inducement agreement entered into with the investors. In conjunction with the exercise we issued certain inducement warrants to the investors. (See “Stock Purchase Warrants” section of Note

June

and

July 2017,

we issued

167,308

shares of our common stock upon the exercise of certain outstanding common stock purchase warrants. The warrants were exercised at

$3.25

per share and we received approximately

$544,000

in net proceeds.

August 2017,

we completed a public offering of

3,000,000

shares of common stock and

2,250,000

common stock purchase warrants at a public offering price of

$2.00

per each share and common stock purchase warrant. We received aggregate gross proceeds of

$6.0

million and net proceeds of approximately

$5,414,000

from the offering. The warrants allow the holder to purchase

one

share of common stock, have an exercise price of

$2.00

per share and a term of

years. The warrants contain certain cash settlement features and non-standard anti-dilution protection and consequently, are being accounted for as liabilities recorded at fair value each period (See Note

). The costs directly related to this offering were allocated between the common stock and the liability classified warrants with those being allocated to the warrants being expensed as incurred and those allocated to the common stock being charged directly to additional paid-in capital. This offering was made pursuant to our shelf registration statement declared effective by the SEC on

June 23, 2017 (

Registration

No.

333

218608

During the year ended

December 31, 2017

we issued

4,939

shares of our common stock upon the conversion of

4,939

outstanding restricted stock units.