Stockholders’ Equity

Series B Convertible Preferred Stock

As of

September 30, 2018,

there are

100

shares of our Series B Convertible Preferred Stock (“Series B Preferred Stock”) outstanding. The Series B Preferred Stock

may

be converted at any time at the option of the holder into shares of our common stock at a conversion price of

$0.35

per share, or

285,714

shares. During the

nine

months ended

September

30,

2018,

there were

conversions or other transactions involving our Series B Preferred Stock.

Series C Convertible Preferred Stock

As of

September 30, 2018,

there are

2,570

shares of our Series C Convertible Preferred Stock (“Series C Preferred Stock”) outstanding. The Series C Preferred Stock

may

be converted at any time at the option of the holder into shares of our common stock at a conversion price of

$0.015

per share, or

171,349,733

shares. During the

nine

months ended

September

30,

2018,

there were

conversions or other transactions involving our Series C Preferred Stock.

Series D Convertible Preferred Stock

As of

September 30, 2018,

there are

shares of our Series D Convertible Preferred Stock (“Series D Preferred Stock”) outstanding. During the

nine

months ended

September

30,

2018,

1,000

shares our Series D Preferred Stock were converted into

66,666,666

shares of our common stock.

Series E Convertible Preferred Stock

March 2018,

we issued

600

shares of our Series E Convertible Preferred Stock,

$1,000

stated value (“Series E Preferred Stock”), for net proceeds, after deduction of certain expenses, of

$590,000.

September 2018,

we issued an additional

600

shares of Series E Preferred Stock for net proceeds of

$600,000.

Each share of Series E Preferred Stock is entitled to a liquidation preference equal to the initial purchase price, has

voting rights, and is

not

entitled to a dividend. The Series E Preferred Stock is convertible at any time at the option of the holders into shares of our common stock, with a current conversion price of

$0.02544

per share. The Series E Preferred Shares contains price adjustment provisions, which

may,

under certain circumstances reduce the conversion price to match if we sell or grant options to purchase, including rights to reprice, our common stock or common stock equivalents at a price lower than the then conversion price of the Series E Preferred Stock, or if we announce plans to do so.

In connection with the Series E Preferred Stock issuance in

September 2018,

we also issued the purchasers Series G Warrants to purchase an aggregate of up to

47,169,812

shares of our common stock. The warrants have an exercise price of

$0.02544

per share, are exercisable once they have been outstanding for

six

months and have a term equal to

years from the date of issuance. The warrants contain anti-dilution and price adjustment provisions, which

may,

under certain circumstances reduce the exercise price to match if we sell or grant options to purchase, including rights to reprice, our common stock or common stock equivalents at a price lower than the then exercise price of the warrants, or if we announce plans to do so. The number of shares subject to warrants will

not

increase due to such reductions in exercise price.

We assessed the Series E Preferred Stock under ASC Topic

480,

“

Distinguishing Liabilities from Equity

” (“ASC

480”

), ASC Topic

815,

“

Derivatives and Hedging

” (“ASC

815”

), and ASC Topic

470,

“

Debt

” (“ASC

470”

). The preferred stock contains an embedded feature allowing an optional conversion by the holder into common stock which meets the definition of a derivative. However, we determined that the preferred stock is an “equity host” (as described by ASC

815

) for purposes of assessing the embedded derivative for potential bifurcation and that the optional conversion feature is clearly and closely associated to the preferred stock host; therefore, the embedded derivative does

not

require bifurcation and separate recognition under ASC

815.

During the

nine

months ended

September

30,

2018,

there were

conversions or other transactions involving our Series E Preferred Stock except as described above.

Common Stock Transactions

As discussed above, during the

nine

months ended

September 30, 2018,

we issued

66,666,666

shares of our common stock pursuant to the conversion of

1,000

shares of our Series D Preferred Stock.

February 2018,

we issued

5,000,000

shares of our common stock in connection with our entering into a financial advisory and investment banking agreement (see “Stock-Based Compensation Expense” below).

Stock Options

The following table presents a summary of our stock option transactions during the

nine

months ended

September 30, 2018:

	Number of Shares			Weighted Average Exercise Price
Outstanding at December 31, 2017		7,024,275		$	0.29
Granted		3,000,000			0.03
Exercised		--			--
Forfeited or expired		(169,334	)		2.46
Outstanding at September 30, 2018		9,854,941		$	0.17
Exercisable at September 30, 2018		4,890,618		$	0.29

Stock Purchase Warrants

February 28, 2018,

in connection with issuance of the note payable discussed in Note

we issued a

five

-year warrant to purchase

178,571

shares of our common stock at a purchase price of

$0.042

per share. On

September 5, 2018,

in connection with issuance of Series E Preferred Stock discussed above, we issued

three

-year warrants to purchase an aggregate of

47,169,812

shares of our common stock at a purchase price of

$0.02544

per share. We had

other stock purchase warrants outstanding at

September 30, 2018.

Stock-Based Compensation Expense

Stock-based compensation expense related to our stock option plans was

$85,370

and

$132,569

for the

three

-month and

nine

-month periods ended

September 30, 2018,

respectively, as compared to

$14,433

and

$43,535

for the

three

-month and

nine

-month periods ended

September 30, 2017,

respectively. Stock-based compensation expense for stock options is recognized on a straight-line basis over the requisite service period for the award and is allocated to research and development expense or general and administrative expense based upon the related employee classification. As of

September 30, 2018,

there was

$145,230

of unrecognized compensation expense related to stock options, which we expect to recognize over a weighted average period of

1.9

years.

Additionally, during the

three

-month and

nine

-month periods ended

September 30, 2018

we recorded stock-based compensation expense of

$57,143

and

$142,856,

respectively, associated with common stock issued for financial advisory services. As of

September 30, 2018,

there was

$57,143

of unrecognized stock-based compensation expense associated with this arrangement, which we expect to recognize during the remainder of

2018

and the

first

half of

2019.