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10-K
2017-12-31
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--12-31
Smaller Reporting Company
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">A summary of stock option activity under the Plan for the year ended
December 31, 2017 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Number of shares</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted Avg. Exercise Price</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted Avg. Remaining Contractual Life</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Aggregate Intrinsic Value</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 37%"><font style="font-size: 10pt">Options outstanding - January 1, 2017</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">2,013,313</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 12%; text-align: right"><font style="font-size: 10pt">6.20</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"> </td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Options granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">538,000</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2.37</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Options exercised</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Options cancelled/forfeit</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(291,334</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">4.45</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Options outstanding - December 31, 2017</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,259,979</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"> $</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">5.51</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">6.11</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">1</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Options exercisable</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">989,664</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"> $</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">5.74</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">6.38</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Options vested and expected to vest</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,137,854</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"> $</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">5.51</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">6.12</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">1</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
15000
15000
2227000
2227000
2466000
90000000
90000000
956000
669000
1293000
1172000
364000
257000
3000
2000
351000
15000
3000
2000
5000
255000
86000
87000
2943000
1672000
3673000
2159000
1211000
1539000
0.001
0.001
IMMY
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The composition of inventories as of December
31, 2017 and 2016 was as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 50%"><font style="font-size: 10pt">Raw materials</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 10pt">956</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 10pt">669</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Finished goods</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,293</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,172</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total inventories</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,249</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,841</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Prepaid expenses and other current assets consisted
of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2017</b></font></td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2016</b></font></td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">Prepaid insurance</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">164</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">315</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Other prepaid expenses</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">426</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">517</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Deposits and other current assets</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">124</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">106</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total prepaid expenses and other current assets</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">714</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">938</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b></b></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company’s intangible assets at December 31, 2017 consisted
of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">Amortization</font></td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">periods</font></td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Accumulated</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Net</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">(in years)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Cost</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">amortization</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Impairment</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Carrying value</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 30%"><font style="font-size: 10pt">Patents</font></td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: center"><font style="font-size: 10pt">17-19 years</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">365</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">(21</font></td>
<td style="width: 1%"><font style="font-size: 10pt">)</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">344</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Licenses</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">20 years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">50</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">50</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Trademarks</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">Indefinite</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">276</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">276</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Customer relationships</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">3-15 years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,998</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(813</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(15</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,170</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Trade name</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">5 years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">16</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(9</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(1</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">6</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Non-competition clause</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">3-4 years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">294</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(273</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(20</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">State pharmacy licenses</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 10pt">25 years</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">45</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(4</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(28</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">13</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">4,044</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(1,120</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(64</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,860</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Amortization expense for intangible assets for the year ended December
31 was as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">Patents</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">15</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">5</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Customer relationships</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">257</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">255</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Trade name</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Non-competition clause</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">87</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">86</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">State pharmacy licenses</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">364</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">351</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Estimated future amortization expense for the
Company’s intangible assets at December 31, 2017 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Years ending December 31,</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 72%"><font style="font-size: 10pt">2018</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 25%; text-align: right"><font style="font-size: 10pt">228</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2019</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">225</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2020</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">222</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">222</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2022</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">222</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Thereafter</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,741</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,860</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts payable and accrued expenses at December
31, 2017 and 2016 consisted of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%"><font style="font-size: 10pt">Accounts payable</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; text-align: right"><font style="font-size: 10pt">3,241</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; text-align: right"><font style="font-size: 10pt">2,999</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Deferred rent</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">388</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">412</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Accrued interest (see Note 11)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">256</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">116</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Accrued exit fee for notes payable (see Note 11)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">800</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">667</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Building lease liability</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">11</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Total accounts payable and accrued expenses</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">4,685</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">4,205</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: Current portion</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(3,885</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(3,538</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Non-current total accrued expenses</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">800</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">667</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
978000
970000
167000
90000
1966000
1.915
1.915
1.79
5.25
8.50
3.60
3.75
1.79
1.79
1.93
3.08
1.79
2.08
1.79
3.60
1.79
2.08
2940000
11088000
714000
938000
2249000
1841000
3885000
3538000
800000
667000
-88836000
-76851000
20623129
18627915
20623129
18627915
137067
56822
16076
200000
80245
24421
2772000
3000000
0001360214
3973000
14008000
7937000
14008000
20777629
23000
772000
6887000
2000000
2000000
6215000
7295000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">At December 31, 2017, future payments under the Company’s
capital lease were as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Amount</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%"><font style="font-size: 10pt">2018</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">773</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">751</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total minimum lease payments</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,524</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: amount representing interest payments</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(96</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Present value of future minimum lease payment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,427</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: unamortized discount</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(110</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,317</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: current portion, net of unamortized discount</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(598</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Capital lease obligation net of current portion and unamortized discount</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">720</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
FY
2017
21000
19000
2615000
6432000
10000
56369000
-57764000
19000
83264000
-76851000
21000
91430000
-88836000
-1385000
12676000
23917000
27247000
13440000
1529000
2921000
8806000
14753000
13440000
2860000
2972000
23917000
27247000
13440000
1209000
1638000
29000
91000
53000
207000
598000
458000
5774000
9905000
764000
720000
1318000
52000
936000
21302000
20815000
26684000
19927000
90000
15000
26774000
19942000
13505000
9831000
13269000
10111000
7059000
7382000
17960000
17569000
413000
739000
25432000
25993000
-12163000
-15882000
8036000
-3026000
-2774000
-757000
-3316000
-354000
-69000
-173000
1401000
1055000
203000
113000
-1392000
2081000
821000
429000
-274000
152000
346000
1515000
-429000
438000
-62000
26000
-8803000
-11215000
252000
252000
-961000
-7289000
626000
267000
206000
195000
179000
-88000
4930000
24672000
-4834000
6168000
4019000
8853000
2685000
9000
9000
2322000
2646000
675000
464000
81000
-935000
-111000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below illustrates the fair value
per share determined using the Black-Scholes-Merton option pricing model with the following assumptions used for valuing options
granted to employees:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 62%"><font style="font-size: 10pt">Weighted-average fair value of options granted</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">2.04</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">3.91</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Expected terms (in years)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.81 - 6.11</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.81 - 6.11</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Expected volatility</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">112 - 117</font></td>
<td><font style="font-size: 10pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">101 - 112</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Risk-free interest rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.77 - 2.01</font></td>
<td><font style="font-size: 10pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.07 - 1.70</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Dividend yield</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below illustrates the fair value
per share determined using the Black-Scholes-Merton option pricing model with the following assumptions used for valuing options
granted to consultants:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%"><font style="font-size: 10pt">Weighted-average fair value of options granted</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 21%; text-align: right"><font style="font-size: 10pt">6.18</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Expected terms (in years)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">10</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Expected volatility</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">109</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Risk-free interest rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.06</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Dividend yield</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"><b> </b></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below illustrates the fair value
per share determined by the Black-Scholes-Merton option pricing model with the following assumptions used for valuing warrants
granted during the year ended December 31, 2016 related to settlement agreements:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%"><font style="font-size: 10pt">Weighted-average fair value of warrants granted</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">2.88</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Expected terms (in years)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Expected volatility</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">106</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Risk-free interest rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.79</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Dividend yield</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below illustrates the fair value
per share determined by the Black-Scholes-Merton option pricing model with the following assumptions used for valuing warrants
granted during the year ended December 31, 2017 related to loan agreements:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%"><font style="font-size: 10pt">Weighted-average fair value of warrants granted</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1.70</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Expected terms (in years)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">7.00</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Expected volatility</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">113.5</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Risk-free interest rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.77</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Dividend yield</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table summarizes information about stock options outstanding
and exercisable at December 31, 2017:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Options Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Options Exercisable</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Weighted</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Average</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Weighted</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Weighted</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Remaining</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Average</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Average</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Number</font></td>
<td> </td>
<td> </td>
<td colspan="2"><font style="font-size: 10pt">Contractual</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Exercise</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Number</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Exercise</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Range of Exercise Prices</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Life in Years</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Price</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Exercisable</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Price</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 35%; text-align: center"><font style="font-size: 10pt">$1.47 - $2.60</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">584,500</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">8.15</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">2.18</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">197,997</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">2.35</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center"><font style="font-size: 10pt">$3.20 - $4.50</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">539,906</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">7.94</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.97</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">286,855</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.99</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: center"><font style="font-size: 10pt">$5.49 - $6.36</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">106,536</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.61</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">5.95</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">103,092</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">5.97</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center"><font style="font-size: 10pt">$6.64 - $8.99</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,024,007</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">4.05</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">7.98</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">396,690</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">8.18</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 10pt">$42.80</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5,030</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">2.62</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">42.80</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5,030</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">42.80</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: center"><font style="font-size: 10pt">$1.47 - $42.80</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,259,979</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">6.11</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">5.51</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">989,664</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">5.74</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"> </p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of the Company’s RSU activity
and related information for the year ended December 31, 2017 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">  </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Number of RSUs</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted Average Grant Date Fair Value</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 62%"><font style="font-size: 10pt">RSUs unvested - January 1, 2017</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">1,292,876</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">2.43</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">RSUs granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">62,892</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3.18</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">RSUs vested</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(56,822</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.94</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">RSUs cancelled/forfeit</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">RSUs unvested at December 31, 2017</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,298,946</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2.42</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">A summary of warrant activity during the year ended December 31,
2017 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Number of Shares Subject to Warrants Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted Avg. Exercise Price</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%"><font style="font-size: 10pt">Warrants outstanding - January 1, 2017</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 18%; text-align: right"><font style="font-size: 10pt">5,748,829</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; text-align: right"><font style="font-size: 10pt">1.91</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">615,386</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2.08</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Exercised</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(100,000</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.79</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Expired</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Warrants outstanding and exercisable - December 31, 2017</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6,264,215</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">1.93</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Weighted average remaining contractual life of the outstanding warrants in years - December 31, 2017</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.52</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">All warrants outstanding as of December 31, 2017 are included in
the following table:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="9" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Warrants Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="5" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Warrants Exercisable</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Warrants</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Exercise</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Warrants</font></td>
<td> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">Expiration</font></td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Warrant Series</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Issue Date</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Price</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Exercisable</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Date</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 29%"><font style="font-size: 10pt">Lender warrants</font></td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"><font style="font-size: 10pt">5/11/2015</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"><font style="font-size: 10pt">125,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 12%; text-align: right"><font style="font-size: 10pt">1.79</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"><font style="font-size: 10pt">125,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"><font style="font-size: 10pt">5/11/2025</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Underwriter warrants</font></td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2/7/2013</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">55,688</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">5.25</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">55,688</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2/7/2018</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Settlement warrants</font></td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8/16/2016</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">40,000</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.75</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">40,000</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8/16/2021</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Warrants issued to investor relations consultant</font></td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">7/19/2013</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">60,000</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">8.50</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">60,000</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">7/19/2018</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Placement Agent Warrants</font></td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">12/27/2016</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">210,313</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">1.79</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">210,313</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">12/27/2019</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">PIPE Investor Warrants</font></td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">12/27/2016</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5,157,828</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">1.79</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5,157,828</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">12/27/2019</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Lender warrants (see Note 11)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">7/19/2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">615,386</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">2.08</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">615,386</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">7/19/2024</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6,264,215</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">1.93</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6,264,215</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"><b> </b></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recorded stock-based compensation
(including issuance of common stock for services and accrual for stock-based compensation) related to equity instruments granted
to employees, directors and consultants as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">Employees - selling and marketing</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">449</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">498</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Employees - general and administrative</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,229</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,954</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Directors - general and administrative</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">205</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">221</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Consultants - selling and marketing</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">60</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Other - general and administrative</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">115</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,943</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,788</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
4219000
9980454
9162259
164000
315000
426000
517000
124000
106000
P5Y
P25Y
P3Y
P15Y
P3Y
P4Y
P20Y
P17Y
P19Y
P20Y
Indefinite
4044000
2998000
16000
294000
45000
365000
276000
50000
1120000
813000
9000
273000
4000
21000
-64000
-15000
-1000
-20000
-28000
2860000
2170000
6000
1000
13000
344000
276000
50000
1741000
3241000
2999000
388000
412000
256000
116000
800000
667000
800000
11000
4685000
4205000
110000
1992000
751000
1524000
96000
1427000
1317000
3335000
116291
1312500
1312500
3500000
3335000
25273
30000
30000
35427
7.85
2.40
3.60
2940000
0.06
0.030
63450
157500
62892
P6Y4M17D
P5Y
P10Y
P5Y
P10Y
4103000
1326000
P2Y6M
P10M25D
0.10
1124000
450000
212000
-12920000
-19198000
-11985000
-19087000
-19087000
-11985000
-8036000
200000
200000
3507000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows the computation of
basic and diluted net loss per share of common stock for the years ended December 31, 2017 and 2016:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">For the </font><br />
<font style="font-size: 10pt">Year Ended December 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">For the </font><br />
<font style="font-size: 10pt">Year Ended December 30, 2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; padding-bottom: 2.5pt"><font style="font-size: 10pt">Numerator – net loss</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(11,985</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(19,087</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Denominator – weighted average</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">number of shares outstanding, basic and diluted</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">20,027,712</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">12,743,184</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Net loss per share, basic and diluted</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(0.60</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(1.50</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b></b></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The unaudited condensed results of operations
information of Eton is summarized below (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">From the period beginning April 27, 2017 </font><br />
<font style="font-size: 10pt">(inception) to </font><br />
<font style="font-size: 10pt">December 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Revenues, net</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 65%; padding-bottom: 1.5pt"><font style="font-size: 10pt">Loss from operations</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"> </td>
<td style="width: 32%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">8,036</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Net loss</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(8,036</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The unaudited condensed balance sheet information
of Eton is summarized below (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">At</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">December 31, 2017</p></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%; padding-bottom: 1.5pt"><font style="font-size: 10pt">Current assets</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">13,440</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Total assets</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">13,440</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Current liabilities</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">764</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Stockholders’ equity</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">12,676</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Total liabilities and stockholders’ equity</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">13,440</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
302000
5725000
-2218000
83000
100000
18000
0.06
10000000
10000
10000
365000
40000
410000
0.125
0.06
0.1050
0.0150
0.0300
0.0800
462000
60000
52000
1.00
10000
113000
-354000
413000
226000
639000
-127000
16000000
13999000
3000000
13332000
P20M
P5Y
750000
All amounts owed under the SWK Loan Agreement, including a final fee equal to 5% of the aggregate principal amount loaned thereunder, will be due and payable on July 19, 2022, or if certain revenue requirements are not met, July 19, 2021. The Company may elect to prepay all, but not less than all, of the amounts owed under the SWK Loan Agreement prior to the maturity date at any time after July 19, 2019. If certain revenue requirements are not met, the Company may be allowed to prepay the loan from July 19, 2018 to July 19, 2019, provided that a prepayment fee equal to 6% of the principal amount of the loan will also be due.
415586
210313
615386
P7Y
75000
25000
302000
302000
60000
100000
15000
179000
9217000
Vesting terms for options granted in 2017 and 2016 to employees and consultants typically included one of the following vesting schedules: 25% of the shares subject to the option vest and become exercisable on the first anniversary of the grant date and the remaining 75% of the shares subject to the option vest and become exercisable quarterly in equal installments thereafter over three years; quarterly vesting over three years. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plan) and in the event of certain modifications to the option award agreement.
Vesting terms for options granted in 2017 and 2016 to employees and consultants typically included one of the following vesting schedules: 25% of the shares subject to the option vest and become exercisable on the first anniversary of the grant date and the remaining 75% of the shares subject to the option vest and become exercisable quarterly in equal installments thereafter over three years; quarterly vesting over three years. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plan) and in the event of certain modifications to the option award agreement.
1.70
50000
0.27
95000
302000
0.60
-1.50
20027712
12743184
303000
-884000
-1966000
1537000
115000
50000
50000
1124000
212000
11088000
57000
800000
982000
840000
982000
410000
15518000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Assets sold during the year ended December
31, 2017 consisted of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 65%"><font style="font-size: 10pt">Inventories</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 32%; text-align: right"><font style="font-size: 10pt">413</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Furniture and equipment</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">226</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">639</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Loss on asset sale</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(127</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Assets sold</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">512</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 7. ASSET SALES AND NOTE RECEIVABLE</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 27, 2017, the Company entered into
an Asset Purchase Agreement (the “PA Agreement”) with Creative Pharmacy Solutions Central, LLC (the “Buyers”),
which closed in July 2017. U<font style="background-color: white">nder the terms of the PA Agreement, the Company sold substantially
all its assets associated with its sinus related business, including but not limited to, certain </font>intellectual property rights,
trademarks, copyrights, inventories, equipment, customer lists, databases, permits, licenses, and assignment of <font style="background-color: white">the
Company’s lease obligation for its Pennsylvania based pharmacy (the “PA Assets”), for a total purchase price
of approximately $450.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under the terms of the PA Agreement, the Buyers,
upon closing, paid to the Company an aggregate cash amount of $40. In addition, the Buyers are obligated to pay the remaining $410
pursuant to a note bearing interest at 6% per annum (the “Sellers Note”). The Buyers are required to make forty-eight
monthly cash payments to the Company of $10 following the closing, totaling $462; provided however, that the Buyer had the option
to make a one-time payment of $365 any time prior to December 31, 2017, and the Company would have waive any remaining amounts
due on the Sellers Note. The principal amount of the Sellers Note was also subject to post-closing adjustment through December
31, 2017, if certain criteria were met, however, that period ended and no adjustments were made. There was $400 due under the Sellers
Note as of December 31, 2017, which has not yet been paid.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2017, future minimum payments
to the Company under its note receivable were as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Amount</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 65%"><font style="font-size: 10pt">2018</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 32%; text-align: right"><font style="font-size: 10pt">135</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2019</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">116</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2020</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">116</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">2021</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">77</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total minimum note receivable, including interest</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">444</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: amount representing interest income</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">47</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Present value of future minimum note receivable</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">397</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: current portion</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">95</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Note receivable net of current portion</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">302</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recorded a loss of $69 during the
year ended December 31, 2017, related to the sale of the PA Assets.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In June 2017, in a separate transaction, the
Company entered into an agreement to sell certain equipment to a third party for amount of $60 and closed the transaction in July
2017. The Company recorded a loss related to equipment of $52 during the year ended December 31, 2017.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Assets sold during the year ended December
31, 2017 consisted of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 65%"><font style="font-size: 10pt">Inventories</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 32%; text-align: right"><font style="font-size: 10pt">413</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Furniture and equipment</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">226</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">639</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Loss on asset sale</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(127</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Assets sold</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">512</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2017, the Company entered into
a stock purchase agreement (the “SPA”) with Livernois & London, LLC (“Livernois”). Pursuant to the
terms of the SPA, the Company sold to Livernois 100% of the issued and outstanding shares of common stock of its Texas based subsidiary,
ImprimisRx TX, Inc. dba ImprimisRx (“Imprimis TX”). The SPA did not transfer to Livernois any of the Company’s
rights to intellectual property, products, clients, nor any of its existing business operations. As consideration for the purchase
of Imprimis TX, Livernois paid the Company $10 and the Company assigned, and Livernois assumed, the remaining lease obligation
totaling $113 for the Texas based facility. The Company recorded a loss of $173 from the sale of Imprimis TX for the year ended
December 31, 2017, which is included in the accompanying consolidated statements of operations.</p>
512000
116000
116000
77000
444000
397000
47000
2.08
7.97
P7Y
P5Y
P10Y
0.0177
0.0104
0.0125
0.0122
0.0170
0.00
0.00
16000000
16000000
8040000
1066000
1282000
228000
557714
57042
5257828
33800
113000
13999000
1933000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2017, future minimum payments
to the Company under its note receivable were as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Amount</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 65%"><font style="font-size: 10pt">2018</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 32%; text-align: right"><font style="font-size: 10pt">135</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2019</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">116</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2020</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">116</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">2021</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">77</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total minimum note receivable, including interest</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">444</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: amount representing interest income</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">47</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Present value of future minimum note receivable</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">397</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: current portion</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">95</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Note receivable net of current portion</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">302</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Future minimum payments under notes payable
outstanding at December 31, 2017 are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt"><b>Year Ending December 31,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Amount</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%"><font style="font-size: 10pt">2018</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,947</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2019</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3,657</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2020</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3,440</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3,214</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">2022</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">11,201</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Total minimum payments</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">23,459</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: amount representing interest</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(7,459</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Notes payable, gross</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">16,000</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
400000
No
No
Yes
9755678
18627915
20623129
55000
55000
55000
-143000
1000
-144000
132367
1124000
212000
212000
1000
1123000
57042
557714
75000000
302
2883000
3811000
3811000
2883000
2940000
11088000
3000
11085000
1000
2939000
9217000
5000
9212000
5257828
2362000
2362000
250000
3969000
275000
422000
P3Y
P5Y
303000
64000
239000
0.55
0
55000
73000
41000
1401000
1055000
1239000
831000
377000
424000
2545000
2559000
4810000
4836000
8971000
8650000
2756000
1355000
-239000
23459000
10000000
3000000
The term loan bore interest at a fixed per-annum rate of 12.5% and allowed for 2% of the interest to be paid-in-kind until December 2016. The Company was permitted to pay interest only until June 1, 2017.
2021-05-11
2019-01-01
2021-05-11
125000
P10Y
1.135
1.02
1.09
1.03
1.11
The Company was permitted to redeem the Convertible Note prior to its maturity at any time on or after March 1, 2018 for cash purchase prices equal to 109% - 105% of the outstanding principal amount of the Convertible Note, depending on the date of redemption.
5.90
5.90
3.60
5.90
1.05
2322000
0.0800
64000
2070000
2070000
444000
293000
300000
67000
83709
144000
0.075
35000
20000
852000
250000
200000
3.68
1997500
5000000
5000000
0.001
0.001
2000000
9000
15000
1050000
59000000
1543000
1366000
884000
1966000
179000
179000
100000
25000
60000
60000
982000
982000
9217000
73000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="background-color: white">The Company
used a lattice binomial model to estimate a derived service period of 33 months related to the performance-based vesting grants
and used the following assumptions:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%"><font style="font-size: 10pt">Market price</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">3.98</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Contractual terms (in years)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.00</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Expected volatility</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">102</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Risk-free interest rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.04</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Dividend yield</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A reconciliation of the change in the UTB balance
from January 1, 2017 to December 31, 2017 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Fed & State Tax</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 72%"><font style="font-size: 10pt">Balance at January 1, 2017</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 25%; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Additions for tax positions related to current year</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Additions/(reductions) for tax positions related to prior years</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Balance at December 31, 2017</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt"><b>Total unrecognized tax benefits as of December 31, 2017</b></font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
200000
200000
2400000
3000000
50000
0.03
225000
228000
222000
222000
222000
0.05
0.01
0.168
773000
-7459000
2259979
2013313
538000
291334
989664
2137854
5.51
6.20
2.37
4.45
5.51
2.18
3.97
5.95
7.98
42.80
5.74
5.51
P6Y1M9D
P6Y1M13D
1000
1000
2.04
3.18
3.91
6.18
1.70
2.88
P5Y9M22D
P6Y1M9D
P5Y9M22D
P6Y1M9D
P10Y
P7Y
P5Y
1.09
1.135
1.06
1.12
1.01
1.17
1.12
0.0106
0.0177
0.0079
0.0177
0.0107
0.0201
0.0170
1.47
1.47
3.20
5.49
6.64
42.80
42.80
2.60
4.50
6.36
8.99
2259979
584500
539906
106536
1024007
5030
P6Y1M9D
P8Y1M24D
P7Y11M8D
P5Y7M10D
P4Y0M18D
P2Y7M13D
989664
197997
286855
103092
396690
5030
5.74
2.35
3.99
5.97
8.18
42.80
230000
230000
230000
230000
287500
9.00 or greater
10.00 or greater
12.00 or greater
14.00 or greater
15.00 or greater
3.98
1292876
1298946
62892
-56822
2.43
2.42
3.94
2943000
449000
498000
2229000
2954000
205000
221000
60000
3788000
115000
5748829
6264215
615386
-100000
P2Y6M7D
1.91
1.93
2.08
1.79
2015-05-11
2013-02-07
2013-07-19
2016-08-16
2016-12-27
2016-12-27
2017-07-19
125000
55688
60000
40000
210313
5157828
6264215
615386
125000
55688
60000
40000
210313
5157828
6264215
615386
2025-05-11
2025-05-11
2018-02-07
2018-07-19
2021-08-16
2019-12-27
2019-12-27
2024-07-19
2322000
675000
-211000
324000
-464000
-2646000
5000
8000
5000
8000
6474000
-5623000
-283000
-1713000
-7126000
7225000
-935000
-111000
-935000
-111000
17405000
21555000
58000
199000
351000
398000
596000
556000
2534000
3875000
-501000
-936000
19458000
25647000
19458000
26583000
-936000
1.00
0.04
288000
248000
483000
100000
75000
302000
81000
7565
2635
10200
4500
8600
7000
649000
668000
29000
10000
15000
0.03
0.03
0.0375
2021-12-31
2020-12-31
2022-07-31
698000
551000
40000
450000
861000
the Company is required to make royalty payments to Dr. Lindstrom ranging from 3% to 6% of net sales, dependent upon the final formulation of the Klarity Product sold.
50000
50000
50000
50000
44000
64000
19000
50000
100000
0.10
0.14
183000
697000
697000
697000
571000
111000
1
0.10
0.10
0.68
0.69
1947000
3657000
3440000
3214000
11201000
2773000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 1. ORGANIZATION</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Imprimis Pharmaceuticals, Inc. (together with
its subsidiaries, unless the context indicates or otherwise requires, the “Company” or “Imprimis”) is
an ophthalmology-focused pharmaceutical company specialized in the development, production and sale of innovative medications
that offer unique competitive advantages and serve unmet needs in the marketplace. The Company is committed to its mission of
delivering high-quality novel medications to physicians and patients at affordable prices. Imprimis operates its business through
several subsidiaries: ImprimisRx, a leading ophthalmology focused compounding business; Park Compounding, a custom compounding
business focused on patient specific orders; and Surface Pharmaceuticals, Inc., an ocular surface disease-focused 505(b)(2) specialty
pharmaceutical subsidiary. The Company also own a passive interest, with royalty stakes on certain drug candidates, in Eton Pharmaceuticals,
Inc. (or “Eton”), a specialty pharmaceutical business utilizing the 505(b)(2) pathway, which Imprimis spun-out in
2017</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property, plant and equipment at December 31,
2017 and 2016 consisted of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Property, plant and equipment, net;</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 54%; padding-left: 10pt"><font style="font-size: 10pt">Computer software and hardware</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,239</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">831</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Furniture and equipment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">377</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">424</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Lab and pharmacy equipment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,545</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,559</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Leasehold improvements</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,810</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,836</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8,971</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8,650</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Accumulated depreciation and amortization</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(2,756</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(1,355</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6,215</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,295</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b></b></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The changes in the carrying value of the Company’s
goodwill during the years ended December 31, 2017 and 2016 were as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%"><font style="font-size: 10pt">Balance at January 1, 2016</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">2,466</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Impairment of ImprimisRx TX</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(239</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Balance at December 31, 2016</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2,227</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">No changes</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Balance at December 31, 2017</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,227</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"> </p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Notes payable at December 31, 2017 were as
follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 72%"><font style="font-size: 10pt">SWK note</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 25%; text-align: right"><font style="font-size: 10pt">16,000</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: Discount on note</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(1,992</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: Current portion</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Long-term portion</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt"><b>$</b></font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt"><b>14,008</b></font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">These market-based accelerated vesting conditions
and share amounts (in aggregate) are set forth below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 62%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Tranche</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 18%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Number of shares</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 18%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Target share price</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Tranche 1</font></td>
<td> </td>
<td><font style="font-size: 10pt">230,000 shares</font></td>
<td> </td>
<td><font style="font-size: 10pt">$9.00 or greater</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Tranche 2</font></td>
<td> </td>
<td><font style="font-size: 10pt">230,000 shares</font></td>
<td> </td>
<td><font style="font-size: 10pt">$10.00 or greater</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Tranche 3</font></td>
<td> </td>
<td><font style="font-size: 10pt">230,000 shares</font></td>
<td> </td>
<td><font style="font-size: 10pt">$12.00 or greater</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Tranche 4</font></td>
<td> </td>
<td><font style="font-size: 10pt">230,000 shares</font></td>
<td> </td>
<td><font style="font-size: 10pt">$14.00 or greater</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Tranche 5</font></td>
<td> </td>
<td><font style="font-size: 10pt">287,500 shares</font></td>
<td> </td>
<td><font style="font-size: 10pt">$15.00 or greater</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below illustrates the fair value
per share determined by the Black-Scholes-Merton option pricing model with the following assumptions used for valuing derivative
liabilities:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 79%"><font style="font-size: 10pt">Expected volatility</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 18%; text-align: right"><font style="font-size: 10pt">103 - 111</font></td>
<td style="width: 1%"><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Risk-free interest rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.22 - 1.70</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Dividend yield</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table provides a reconciliation
of all liabilities measured at fair value using Level 3 significant unobservable inputs:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Warrant derivative liability:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Balance at January 1, 2016</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%"><font style="font-size: 10pt">Modification of warrant and reclassification from equity to liabilities</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">675</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Change in fair value</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(211</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Reclassification from liabilities to equity upon closing of public equity offering</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(464</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Balance at December 31, 2016</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Embedded conversion feature derivative liability:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Balance at January 1, 2016</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Embedded conversion feature in Convertible Note issued</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,322</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Change in fair value</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">324</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Reclassification from liabilities to equity upon closing of public equity offering</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(2,646</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Balance at December 31, 2016</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The provision for income taxes for the years
ended December 31, 2017 and 2016 are summarized below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Current:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Federal</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%; padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">State</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"> </td>
<td style="width: 20%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"> </td>
<td style="width: 20%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">8</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Total current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">8</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Deferred:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Federal</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">6,474</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">(5,623</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">State</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(283</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(1,713</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Change in valuation allowance</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(7,126</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">7,225</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Total deferred</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(935</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(111</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Income tax provision (benefit)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(930</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(103</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A reconciliation of income taxes computed by
applying the statutory U.S. income tax rate to the Company’s loss before income taxes to the income tax provision is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">U.S. federal statutory tax rate</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">35.00</font></td>
<td style="width: 1%"><font style="font-size: 10pt">%</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">35.00</font></td>
<td style="width: 1%"><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Benefit of lower tax brackets</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(1.00</font></td>
<td><font style="font-size: 10pt">)%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(1.00</font></td>
<td><font style="font-size: 10pt">)%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">State tax benefit, net</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.60</font></td>
<td><font style="font-size: 10pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.08</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Research and development credits</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.00</font></td>
<td><font style="font-size: 10pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.00</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Employee stock based compensation</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(0.84</font></td>
<td><font style="font-size: 10pt">)%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(1.47</font></td>
<td><font style="font-size: 10pt">)%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Loss on debt conversion</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(2.39</font></td>
<td><font style="font-size: 10pt">)%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.00</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Capitalization of Subsidiary</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.00</font></td>
<td><font style="font-size: 10pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.00</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Change in Rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(62.97</font></td>
<td><font style="font-size: 10pt">)%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.00</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Other</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3.04</font></td>
<td><font style="font-size: 10pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(0.18</font></td>
<td><font style="font-size: 10pt">)%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Valuation allowance</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">34.82</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">%</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(31.89</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Effective income tax rate</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7.26</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">%</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.54</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">%</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Significant components of the Company’s
deferred tax assets are as follows (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Deferred tax assets (liabilities):</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 54%; padding-left: 10pt"><font style="font-size: 10pt">NOL’s</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">17,405</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">21,555</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Depreciation and amortization</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">58</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">199</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Other</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">351</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">398</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Research & development credits</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">596</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">556</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Deferred stock compensation</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,534</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3,875</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Basis Difference in Eton</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(985</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Park stock purchase identifiable intangibles</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(501</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(936</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Unrealized gain or loss on investments</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 20pt"><font style="font-size: 10pt">Total deferred tax assets, net</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">19,458</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">25,647</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Valuation allowance</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(19,458</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(26,583</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Net deferred tax liabilities</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(936</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following represents future annual minimum
lease payments, as of December 31, 2017:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 67%"><font style="font-size: 10pt">2018</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 30%; text-align: right"><font style="font-size: 10pt">697</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2019</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">697</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2020</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">697</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">571</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">2022</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">111</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Total</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt"><b>$</b></font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt"><b>2,773</b></font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
91430000
83264000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Basis of Presentation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Imprimis has prepared the accompanying consolidated
financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The accompanying consolidated financial statements include the accounts of the Company and its wholly and majority owned subsidiaries.
All intercompany accounts and transactions have been eliminated in consolidation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Use of Estimates</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of financial statements in
conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and
expenses during the reporting periods. Significant estimates made by management are, among others, allowance for doubtful accounts
and contractual adjustments, realizability of inventories, valuation of deferred taxes, goodwill and intangible assets, recoverability
of long-lived assets and goodwill, valuation of contingent acquisition obligations and deferred acquisition obligations, valuation
of notes payable and derivative liabilities, and valuation of stock-based transactions with employees and non-employees. Actual
results could differ from those estimates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Liquidity</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has incurred significant operating
losses and negative cash flows from operations since its inception. The Company incurred net losses of $11,985 and $19,087 for
the years ended December 31, 2017 and 2016, respectively, and had an accumulated deficit of $88,836 and $76,851 as of December
31, 2017 and 2016, respectively. In addition, the Company used cash in operating activities of $8,803 and $11,215 for the years
ended December 31, 2017 and 2016, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">While there is no assurance, the Company believes
its existing cash resources and restricted cash of approximately $4,219 at December 31, 2017, along with proceeds from the Sales
Agreement (see Note 13) will be sufficient to sustain the Company’s planned level of operations for at least the next twelve
months. However, estimates of operating expenses and working capital requirements could be incorrect, and the Company could use
its cash resources faster than anticipated. Further, some or all of the ongoing or planned activities may not be successful and
could result in further losses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company may seek to increase liquidity
and capital resources by one or more of the following which may include, but are not limited to: the sale of assets and/or businesses,
obtaining financing through the issuance of equity, debt, or convertible securities; and working to increase revenue growth through
sales. There is no guarantee that the Company will be able to obtain capital when needed on terms it deems as acceptable, or at
all.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Revenue Recognition and Deferred Revenue</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes revenues when all of
the following criteria have been met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling
price is fixed and determinable; and (4) collectability is reasonably assured.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Product Revenues</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Determination of criteria (3) and (4) is based
on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability
of those amounts. Estimated returns and allowances and other adjustments are provided for in the same period during which the related
sales are recorded. The Company will defer any revenues received for a product that has not been delivered or is subject to refund
until such time that the Company and the customer jointly determine that the product has been delivered and no refund will be required.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>License Revenues</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">License arrangements may consist of non-refundable
upfront license fees, data transfer fees, research reimbursement payments, exclusive license rights to patented or patent pending
compounds, technology access fees, and various performance or sales milestones. These arrangements can be multiple element arrangements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Non-refundable fees that are not contingent
on any future performance by the Company and require no consequential continuing involvement on the part of the Company are recognized
as revenue when the license term commences and the licensed data, technology, compounded drug preparation and/or other deliverable
is delivered. Such deliverables may include physical quantities of compounded drug preparations, design of the compounded drug
preparations and structure-activity relationships, the conceptual framework and mechanism of action, and rights to the patents
or patent applications for such compounded drug preparations. The Company defers recognition of non-refundable fees if it has continuing
performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable
fee has no utility to the licensee and that are separate and independent of the Company’s performance under the other elements
of the arrangement. In addition, if the Company’s continued involvement is required, through research and development services
that are related to its proprietary know-how and expertise of the delivered technology or can only be performed by the Company,
then such non-refundable fees are deferred and recognized over the period of continuing involvement. Guaranteed minimum annual
royalties are recognized on a straight-line basis over the applicable term.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Cost of Sales</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cost of sales includes direct and indirect
costs to manufacture formulations and other products sold, including active pharmaceutical ingredients, personnel costs, packaging,
storage, royalties (see Note 17), shipping and handling costs and the write-off of obsolete inventory.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Research and Development</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company expenses all costs related to research
and development as they are incurred. Research and development expenses consist of expenses incurred in performing research and
development activities, including salaries and benefits, other overhead expenses, and costs related to clinical trials, contract
services and outsourced contracts.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Debt Issuance Costs and Debt Discount</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Debt issuance costs and the debt discount are
recorded net of notes payable and capital lease obligations in the consolidated balance sheets. Amortization expense of debt issuance
costs and the debt discount is calculated using the effective interest method over the term of the debt and is recorded in interest
expense in the accompanying consolidated statements of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Intellectual Property</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The costs of acquiring intellectual property
rights to be used in the research and development process, including licensing fees and milestone payments, are charged to research
and development expense as incurred in situations where the Company has not identified an alternative future use for the acquired
rights, and are capitalized in situations where we have identified an alternative future use for the acquired rights. Patents and
trademarks are recorded at cost and capitalized at a time when the future economic benefits of such patents and trademarks become
more certain (see Goodwill and Intangible Assets). The Company began capitalizing certain costs associated with acquiring intellectual
property rights during 2015, if costs are not capitalized they are expensed as incurred.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Income Taxes</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As part of the process of preparing the Company’s
consolidated financial statements, the Company must estimate the actual current tax liabilities and assess permanent and temporary
differences that result from differing treatment of items for tax and accounting purposes. The temporary differences result in
deferred tax assets and liabilities, which are included within the consolidated balance sheets. The Company must assess the likelihood
that the deferred tax assets will be recovered from future taxable income and, to the extent the Company believes that recovery
is not more likely than not, a valuation allowance must be established which reduces the amount of deferred tax assets recorded
on the consolidated balance sheets. To the extent the Company establishes a valuation allowance or increase or decrease this allowance
in a period, the impact will be included in income tax expense in the consolidated statement of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for income taxes under
the provisions of Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”)
740, “Income Taxes”, or ASC 740. As of December 31, 2017, and 2016, there were no unrecognized tax benefits included
in the consolidated balance sheets that would, if recognized, affect the effective tax rate. The Company’s practice is to
recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest
or penalties in its consolidated balance sheets at December 31, 2017 and 2016, and has not recognized interest and/or penalties
in the consolidated statements of operations for the years ended December 31, 2017 and 2016. The Company is subject to taxation
in the United States, California and New Jersey. The Company’s tax years since 2000 may be subject to examination by the
federal and state tax authorities due to the carryforward of unutilized net operating losses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Cash and Cash Equivalents</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cash equivalents include short-term, highly
liquid investments with maturities of three months or less at the time of acquisition.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Concentrations of Credit Risk</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company places its cash with financial
institutions deemed by management to be of high credit quality. The Federal Deposit Insurance Corporation (“FDIC”)
provides basic deposit coverage with limits up to $250 per owner. At December 31, 2017, the Company had approximately $3,969 in
cash deposits in excess of FDIC limits.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Accounts Receivable</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts receivable are stated net of allowances
for doubtful accounts and contractual adjustments. The accounts receivable balance primarily includes amounts due from customers
the Company has invoiced or from third-party providers (e.g., insurance companies and governmental agencies), but for which payment
has not been received. Charges to bad debt are based on both historical write-offs and specifically identified receivables. Contractual
adjustments are determined by the amount expected to be collected from third-party providers. Accounts receivable are presented
net of allowances for doubtful accounts and contractual adjustments in the amount of $275 and $422 as of December 31, 2017 and
2016, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Inventories</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories are stated at the lower of cost
or market. Cost is determined on a first-in, first-out basis. The Company evaluates the carrying value of inventories on a regular
basis, based on the price expected to be obtained for products in their respective markets compared with historical cost. Write-downs
of inventories are considered to be permanent reductions in the cost basis of inventories.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company also regularly evaluates its inventories
for excess quantities and obsolescence (expiration), taking into account such factors as historical and anticipated future sales
or use in production compared to quantities on hand and the remaining shelf life of products and active pharmaceutical ingredients
on hand. The Company establishes reserves for excess and obsolete inventories as required based on its analyses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Investment in Eton Pharmaceuticals, Inc. </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2017, the Company formed Eton Pharmaceuticals,
Inc. (“Eton”) as a wholly owned subsidiary. In June 2017, Eton entered into and closed on definitive stock purchase
agreements with accredited investors for the purchase of Eton’s Series A Preferred Stock that resulted in net proceeds to
Eton, after deducting placement agent fees and other expenses, of approximately $18,000. At the time of closing, the Company lost
voting and ownership control of Eton and it ceased consolidating Eton’s financial statements. At the time of deconsolidation,
the Company recorded a gain of $5,725 and adjusted the carrying value in Eton to reflect the increased valuation of Eton and the
Company’s new ownership percent in accordance with ASC 810-10-40-4(c), <i>Consolidation</i>.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company owns 3,500,000 common shares (approximately
27% issued and outstanding equity interest as of December 31, 2017) of Eton and, uses the equity method of accounting for this
investment, as management has determined that the Company has the ability to exercise significant influence over the operating
and financial decisions of Eton. Under this method, the Company recognizes earnings and losses of Eton in its financial statements
and adjusts the carrying amount of its investment in Eton accordingly. The Company’s share of earnings and losses are based
on the shares of common stock and in-substance common stock of Eton held by the Company. Any intra-entity profits and losses are
eliminated. During the year ended December 31, 2017, the Company recorded equity in net loss of Eton of $2,218. As of December
31, 2017, the carrying value of the Company’s investment in Eton was $3,507.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Property, Plant and Equipment</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property, plant and equipment is stated at
cost less accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-line method
over the estimated useful life of the asset. Leasehold improvements and capital lease equipment are amortized over the estimated
useful life or remaining lease term, whichever is shorter. Computer software and hardware and furniture and equipment are depreciated
over three to five years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Business Combinations</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for business combinations
by recognizing the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair
values on the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions,
especially with respect to intangible assets, estimated contingent consideration payments and pre-acquisition contingencies. Examples
of critical estimates in valuing certain of the intangible assets the Company has acquired or may acquire in the future include
but are not limited to:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 24px"> </td>
<td style="width: 24px"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">future expected cash flows from product sales, support agreements, consulting contracts, other customer contracts, and acquired developed technologies and patents; and</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">discount rates utilized in valuation estimates.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Unanticipated events and circumstances may
occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Additionally, any change in the
fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes from events
after the acquisition date, such as changes in our estimates of relevant revenue or other targets, will be recognized in earnings
in the period of the estimated fair value change. A change in fair value of the acquisition-related contingent consideration or
the occurrence of events that cause results to differ from our estimates or assumptions could have a material effect on the consolidated
financial position, statements of operations or cash flows in the period of the change in the estimate.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Goodwill and Intangible Assets</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Patents and trademarks are recorded at cost
and capitalized at a time when the future economic benefits of such patents and trademarks become more certain. At that time, the
Company capitalizes third-party legal costs and filing fees associated with obtaining and prosecuting claims related to its patents
and trademarks. Once the patents have been issued, the Company amortizes these costs over the shorter of the legal life of the
patent or its estimated economic life, generally 20 years, using the straight-line method. Trademarks are an indefinite life intangible
asset and are assessed for impairment based on future projected cash flows as further described below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company reviews its goodwill and indefinite-lived
intangible assets for impairment as of January 1 of each year and when an event or a change in circumstances indicates the fair
value of a reporting unit may be below its carrying amount. Events or changes in circumstances considered as impairment indicators
include but are not limited to the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 24px"> </td>
<td style="width: 24px"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">significant underperformance of the Company’s business relative to expected operating results;</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">significant adverse economic and industry trends;</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">significant decline in the Company’s market capitalization for an extended period of time relative to net book value; and</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">expectations that a reporting unit will be sold or otherwise disposed.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The goodwill impairment test consists of a
two-step process as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Step 1. The Company compares the fair value
of each reporting unit to its carrying amount, including the existing goodwill. The fair value of each reporting unit is determined
using a discounted cash flow valuation analysis. The carrying amount of each reporting unit is determined by specifically identifying
and allocating the assets and liabilities to each reporting unit based on headcount, relative revenues or other methods as deemed
appropriate by management. If the carrying amount of a reporting unit exceeds its fair value, an indication exists that the reporting
unit’s goodwill may be impaired and the Company then performs the second step of the impairment test. If the fair value of
a reporting unit exceeds its carrying amount, no further analysis is required.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Step 2. If further analysis is required, the
Company compares the implied fair value of the reporting unit’s goodwill, determined by allocating the reporting unit’s
fair value to all of its assets and its liabilities in a manner similar to a purchase price allocation, to its carrying amount.
If the carrying amount of the reporting unit’s goodwill exceeds its fair value, an impairment loss will be recognized in
an amount equal to the excess.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Impairment of Long-Lived Assets</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Long-lived assets, such as property, plant
and equipment, purchased intangibles subject to amortization and patents and trademarks, are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected
to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge
is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed
of would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value
less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would
be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In September 2016, the Company decided to cease
operations at its Texas facility, and began winding down the operations. Based on current projections regarding future cash flows
of the Texas facility and the related subsidiary, the evaluation resulted in an impairment of $64 related to intangible assets
and $239 related to goodwill, recorded to impairment of long-lived assets on the consolidated statements of operations during the
year ended December 31, 2016. During the year ended December 31, 2017, the Company did not recognize any impairment of its long-lived
assets (See Note 7).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Third Party Billing and Collection Agreements
</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with its acquisition of Park,
the Company entered into a billing and collection agreement with a third party to assist in the billing and collection of workers’
compensation claims. Under the terms of the agreement, the Company is obligated to pay a fixed fee to the third party equal to
55% of the amounts billed and collected under the workers’ compensation claims. The Company accrues for such fees in accounts
payable and accrued expenses in the accompanying consolidated balance sheets. Total billing and collection management expense under
this agreement for the years ended December 31, 2017 and 2016 was $0 and $55, respectively, and is included in selling and marketing
expenses in the accompanying consolidated statements of operations. The amount due under the agreement as of December 31, 2017
and 2016 was $41 and $73, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Deferred Rent </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for rent expense related
to its operating leases by determining total minimum rent payments on the leases over their respective periods and recognizing
the rent expense on a straight-line basis. The difference between the actual amount paid and the amount recorded as rent expense
in each fiscal year and interim periods within each fiscal year is recorded as an adjustment to deferred rent (see Note 10).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Fair Value Measurements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Fair value measurements are determined based
on the assumptions that market participants would use in pricing an asset or liability. GAAP establishes a hierarchy for inputs
used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring
that the most observable inputs be used when available. The established fair value hierarchy prioritizes the use of inputs used
in valuation methodologies into the following three levels:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 24px; text-align: justify"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Level 1: Applies to assets or liabilities for which there are quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.</font></td></tr>
<tr style="vertical-align: top">
<td style="text-align: justify"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Level 2: Applies to assets or liabilities for which there are significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.</font></td></tr>
<tr style="vertical-align: top">
<td style="text-align: justify"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Level 3: Applies to assets or liabilities for which there are significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. For example, Level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2017 and 2016, the Company
did not have any financial assets or liabilities that are measured on a recurring basis. The Company’s financial instruments
included cash and cash equivalents, restricted short-term investments, accounts receivable, accounts payable and accrued expenses,
accrued payroll and related liabilities, deferred revenue and customer deposits, deferred acquisition obligations, notes payable
and capital leases. The carrying amount of these financial instruments, except for deferred acquisition obligations, notes payable
and capital leases, approximates fair value due to the short-term maturities of these instruments. The Company’s restricted
short-term investments are carried at amortized cost, which approximates fair value. Based on borrowing rates currently available
to the Company, the carrying values of the deferred acquisition obligations, notes payable and capital leases, approximate their
respective fair values.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Derivative Instruments</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for free-standing derivative
instruments and hybrid instruments that contain embedded derivative features as either assets or liabilities in the consolidated
balance sheets and are measured at fair value with gains or losses recognized in earnings. Embedded derivatives that are not clearly
and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized
as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based
on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each
instrument.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company estimates the fair value of derivative
instruments and hybrid instruments using various techniques (and combinations thereof) that are considered to be consistent with
the objective of measuring fair value. In selecting the appropriate technique, the Company considers, among other factors, the
nature of the instrument, the market risks that it embodies and the expected means of settlement. The Company generally uses the
Black-Scholes-Merton option pricing model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions
(including trading volatility, estimated terms, dilution and risk-free rates) necessary to fair value these instruments. Estimating
the fair value of derivative financial instruments requires the development of significant and subjective estimates that may, and
are likely to, change over the duration of the instrument with related changes in internal and external market factors. Increases
in the trading price of the Company’s common stock and increases in fair value during a given financial quarter result in
the application of non-cash derivative expense. Conversely, decreases in the trading price of the Company’s common stock
and decreases in fair value during a given financial quarter would result in the application of non-cash derivative income.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Stock-Based Compensation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">All stock-based payments to employees, directors
and consultants, including grants of stock options, warrants, restricted stock units (“RSUs”) and restricted stock,
are recognized in the consolidated financial statements based upon their estimated fair values. The Company uses the Black-Scholes-Merton
option pricing model and Monte Carlo Simulation to estimate the fair value of stock-based awards. The estimated fair value is determined
at the date of grant. The financial statement effect of forfeitures is estimated at the time of grant and revised, if necessary,
if the actual effect differs from those estimates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s accounting policy for equity
instruments issued to consultants and vendors in exchange for goods and services follows FASB guidance. As such, the value of the
applicable stock-based compensation is periodically remeasured and income or expense is recognized during the vesting terms of
the equity instruments. The measurement date for the estimated fair value of the equity instruments issued is the earlier of (i)
the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant
or vendor’s performance is complete. In the case of equity instruments issued to consultants, the estimated fair value of
the equity instrument is primarily recognized over the term of the consulting agreement. According to FASB guidance, an asset acquired
in exchange for the issuance of fully vested, nonforfeitable equity instruments should not be presented or classified as an offset
to equity on the grantor’s balance sheet once the equity instrument is granted for accounting purposes. Accordingly, the
Company records the estimated fair value of nonforfeitable equity instruments issued for future consulting services as prepaid
stock-based consulting expenses in its consolidated balance sheets.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Basic and Diluted Net Loss per Common Share</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic net loss per common share is computed
by dividing net loss attributable to common stockholders for the period by the weighted average number of common shares outstanding
during the period. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders for the
period by the weighted average number of common and common equivalent shares, such as stock options and warrants, outstanding during
the period.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic and diluted net loss per share is computed
using the weighted average number of shares of common stock outstanding during the period. Common stock equivalents (using the
treasury stock and “if converted” method) from deferred acquisition obligations, stock options, unvested RSUs, warrants
and convertible notes were 9,980,454 and 9,162,259 at December 31, 2017 and 2016, respectively, and are excluded from the calculation
of diluted net loss per share for all periods presented because the effect is anti-dilutive. Included in the basic and diluted
net loss per share calculation were RSUs awarded to directors that had vested, but the issuance and delivery of the shares are
deferred until the director resigns. The number of shares underlying these vested RSUs at December 31, 2017 and 2016 was 137,067
and 80,245, respectively,</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows the computation of
basic and diluted net loss per share of common stock for the years ended December 31, 2017 and 2016:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">For the </font><br />
<font style="font-size: 10pt">Year Ended December 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">For the </font><br />
<font style="font-size: 10pt">Year Ended December 30, 2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; padding-bottom: 2.5pt"><font style="font-size: 10pt">Numerator – net loss</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(11,985</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(19,087</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Denominator – weighted average</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">number of shares outstanding, basic and diluted</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">20,027,712</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">12,743,184</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Net loss per share, basic and diluted</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(0.60</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(1.50</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Recently Adopted Accounting Pronouncements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In March 2016, the FASB issued Accounting Standards
Update (“ASU”) 2016-09, <i>Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment
Accounting</i>, which addresses certain aspects of accounting for share-based payment award transactions. The Company adopted this
standard on January 1, 2017. The adoption did not have a material impact on the Company’s financial position, results of
operations and cash flows. Prior periods were not recast.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2015, the FASB issued ASU 2015-11,
<i>Simplifying the Measurement of Inventory, </i>which requires entities to measure most inventory “at the lower of cost
and net realizable value (“NRV”),” thereby simplifying the current guidance under which an entity must measure
inventory at the lower of cost or market. Under the new guidance, inventory is “measured at the lower of cost and net realizable
value,” which eliminates the need to determine replacement cost and evaluate whether it is above the ceiling (NRV) or below
the floor (NRV less a normal profit margin). The guidance defines NRV as the “estimated selling prices in the ordinary course
of business, less reasonably predictable costs of completion, disposal, and transportation.” The Company adopted this standard
on January 1, 2017. The adoption did not have a material impact on the Company’s financial position, results of operations
and cash flows. Prior periods were not recast.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Recently Issued Accounting Pronouncements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2014, the FASB issued ASU 2014-09, <i>Revenue
from Contracts with Customers </i>and has subsequently issued a number of amendments to ASU 2014-09<i>.</i> This updated guidance
supersedes the current revenue recognition guidance, including industry-specific guidance. The updated guidance introduces a five-step
model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers
at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. To achieve this core principle, ASU 2014-09 includes provisions within its five-step model that includes
identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction
price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies
a performance obligation. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue
and cash flows arising from contracts with customers.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The new standard will be effective for the
Company beginning January 1, 2018 and permits two methods of adoption: the full retrospective method, which requires the standard
to be applied to each prior period presented, or the modified retrospective method, which requires the cumulative effect of adoption
to be recognized as an adjustment to opening retained earnings in the period of adoption. The Company will adopt the standard using
the modified retrospective method.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has completed an analysis of existing
contracts with its customers and assessed the differences in accounting for such contracts under ASU 2014-09 compared with current
revenue accounting standards. Based on its review of current customer contracts, the Company does not expect the implementation
of ASU 2014-09 to have a material quantitative impact on its consolidated financial statements as the timing of revenue recognition
for product sales is not expected to significantly change. In limited instances, the Company may recognize revenue earlier than
under the current standard. Under certain licensing arrangements that the Company has considered, there may be times the Company
may defer certain revenue where the price pursuant to the underlying customer arrangement is not fixed and determinable. Under
the new standard, such customer arrangements will be accounted for as variable consideration, which may result in revenue being
recognized earlier provided the Company can reliably estimate the ultimate price expected to be realized from the customer. In
addition, the Company does not expect a material effect for any adjustments to retained earnings upon adoption of the standard
on January 1, 2018. Adoption of the new standard will also result in additional revenue-related disclosures in the footnotes to
the Company’s consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2016, the FASB issued ASU 2016-01,
<i>Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities</i>, which addresses certain
aspects of recognition, measurement, presentation and disclosure of financial statements. This guidance will be effective in the
first quarter of fiscal year 2019 and early adoption is not permitted. The Company is currently evaluating the impact that this
guidance will have on its consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2016, the FASB issued new lease
accounting guidance in ASU No. 2016-02, <i>Leases</i> (Topic 842). This new guidance was initiated as a joint project with the
International Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of financial
information for users. This new guidance would eliminate the concept of off-balance sheet treatment for “operating leases”
for lessees for the vast majority of lease contracts. Under ASU No. 2016-02, at inception, a lessee must classify all leases with
a term of over one year as either finance or operating, with both classifications resulting in the recognition of a defined “right-of-use”
asset and a lease liability on the balance sheet. However, recognition in the income statement will differ depending on the lease
classification, with finance leases recognizing the amortization of the right-of-use asset separate from the interest on the lease
liability and operating leases recognizing a single total lease expense. Lessor accounting under ASU No. 2016-02 would be substantially
unchanged from the previous lease requirements under GAAP. ASU No. 2016-02 will take effect for public companies in fiscal years
beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted and for leases
existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, lessees
and lessors must apply a modified retrospective transition approach. During the year ended December 31, 2017, the Company evaluated
this new accounting standard and engaged professionals in the new lease accounting implementation to assist in determining the
effect of the new standard as of January 1, 2018 with respect to the Company’s real estate leases. The Company currently
has three real estate leases and evaluated each of these leases in accordance with the new lease accounting standard under ASC
Topic 842. As of January 1, 2018, the Company estimates that the right of use asset to be recorded on its consolidated balance
sheet would be approximately $2,400 and that the related lease liability would be approximately $3,000 related to operating leases.
The difference between the right of use asset and related lease liability is predominantly deferred rent and other related lease
expenses under the new lease accounting standard. The Company will continue this effort with respect to equipment leases and any
other leases contemplated under Topic 842 in a manner to be appropriately prepared for its implementation on or before January
1, 2019.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2016, the FASB issued ASU 2016-18,
<i>Statement of Cash Flows: Classification Restricted Cash</i>, which requires that a statement of cash flows explain the change
during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash
equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with
cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash
flows. ASU 2016-18 is effective for reporting periods beginning after December 15, 2017 with early adoption permitted. The Company
expects the implementation of this standard to have an impact on the Company’s consolidated financial statements and related
disclosures as the Company had restricted cash on our balance sheet of $200 as of December 31, 2017, and currently do not present
the amount as a cash equivalent in our consolidated statements of cash flows.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2017, the FASB issued ASU 2017-01,
<i>Business Combinations, Clarifying the Definition of a Business,</i> which revises the definition of a business and provides
new guidance in evaluating when a set of transferred assets and activities is a business. ASU 2017-01 is effective for reporting
periods beginning after December 15, 2017 with early adoption permitted. The Company does not expect the ASU 2017-01 to have a
material impact on the Company’s financial position, results of operations and cash flows.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2017, the FASB issued ASU 2017-04,
<i>Intangibles-Goodwill and Other</i>. This guidance simplifies the accounting for goodwill impairment for all entities by requiring
impairment charges to be based on the first step in the current two-step impairment test under ASC 350. The updated standard eliminates
the requirement to calculate a goodwill impairment charge using Step 2. If a reporting unit’s carrying amount exceeds its
fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount
of goodwill allocated to that reporting unit. ASU 2017-04 is effective for reporting periods beginning after December 31, 2019
on a prospective basis, and early adoption is permitted. The Company does not expect ASU 2017-04 to have a material effect on the
Company’s financial position, results of operations and cash flows.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2017, the FASB issued ASU 2017-09,
<i>Compensation - Stock Compensation: Scope of Modification Accounting</i>. The amendments in this update provide guidance about
which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting under
Topic 718. An entity should account for effects of a modification unless all of the following are met: (1) the fair value of the
modified award is the same as the fair value of the original award immediately before the original award is modified; (2) the
vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original
award is modified; (3) the classification of the modified award as an equity instrument or a liability instrument is the same
as the classification of the original award immediately before the original award is modified. The amendments in this update are
effective for all entities for annual periods and interim periods within those annual periods, beginning after December 15, 2017,
which for the Company means January 1, 2018. Early adoption is permitted, including adoption in any interim period for public
business entities for reporting periods for which financial statements have not yet been issued. The Company does not expect the
adoption of ASU 2017-09 to have a material effect on the Company’s financial position, results of operations and cash flows.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 3. INVESTMENT IN ETON PHARMACEUTICALS,
INC. AND AGREEMENTS - RELATED PARTY TRANSACTIONS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2017, the Company entered into two asset
purchase and license agreements (the “Eton License Agreements”) with its previously wholly owned subsidiary, Eton Pharmaceuticals,
Inc. Pursuant to the terms of the Eton License Agreements, the Company assigned and licensed to Eton certain intellectual property
and related rights to develop, formulate, make, sell, and sub-license formulations of synthetic corticotropin and injectable pentoxifylline
(collectively, the “Eton Products”). Eton is required to make royalty payments to the Company of six percent (6%) of
net sales of the Eton Products while any patent rights remain outstanding and then three percent (3%) of net sales in the event
patent claims are not issued. In addition, Eton is required to make certain milestone payments to the Company including payments
of $50 upon initial patent issuances for each Eton Product. The Eton License Agreements were conditioned upon Eton receiving net
proceeds of the sale of its equity securities of not less than $10,000, which occurred in June 2017. See also Note 2, under the
subheading <i>Investment in Eton Pharmaceuticals, Inc.</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 1, 2017, the Company and Eton entered
into a Management Services Agreement (the “MSA”), whereby the Company provided to Eton certain administrative services
and support, including bookkeeping, web services and human resources related activities, and Eton will pay the Company a monthly
amount of $10. A 30-day notice of termination was delivered to the Company on August 29, 2017. Eton paid the Company $40 for services
under the MSA.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2017, the Company was due
$50 from Eton for amounts due related a milestone payment under the Eton Licenses Agreement for the issuance of certain patent
rights, this amount is included in license revenues and other current assets on the accompanying consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company owns approximately 27% of the voting
interests in Eton. The Company’s Chief Executive Officer, Mark L. Baum, is a director of Eton, and several employees of the
Company (including Mr. Baum and the Company’s Chief Financial Officer, Andrew R. Boll) have entered into consulting agreements
with Eton.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The unaudited condensed results of operations
information of Eton is summarized below (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">From the period beginning April 27, 2017 </font><br />
<font style="font-size: 10pt">(inception) to </font><br />
<font style="font-size: 10pt">December 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Revenues, net</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 65%; padding-bottom: 1.5pt"><font style="font-size: 10pt">Loss from operations</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"> </td>
<td style="width: 32%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">8,036</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Net loss</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(8,036</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The unaudited condensed balance sheet information
of Eton is summarized below (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">At</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">December 31, 2017</p></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%; padding-bottom: 1.5pt"><font style="font-size: 10pt">Current assets</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">13,440</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Total assets</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">13,440</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Current liabilities</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">764</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Stockholders’ equity</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">12,676</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Total liabilities and stockholders’ equity</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">13,440</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 4. RESTRICTED CASH </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The restricted cash at December 31, 2017 and
2016 consisted of funds held in a money market account. At December 31, 2017 and 2016, the restricted cash was recorded at amortized
cost, which approximates fair value.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2017 and 2016, the funds held
in a money market account of $200 were classified as a current asset. The money market account funds are required as collateral
as additional security for the Company’s New Jersey facility lease.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 5. INVENTORIES </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories are comprised of finished compounded
formulations, over-the-counter and prescription retail pharmacy products, commercial pharmaceutical products, related laboratory
supplies and active pharmaceutical ingredients. The composition of inventories as of December 31, 2017 and 2016 was as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 50%"><font style="font-size: 10pt">Raw materials</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 10pt">956</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 10pt">669</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Finished goods</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,293</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,172</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total inventories</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,249</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,841</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 6. PREPAID EXPENSES AND OTHER CURRENT ASSETS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Prepaid expenses and other current assets consisted
of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2017</b></font></td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2016</b></font></td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">Prepaid insurance</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">164</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">315</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Other prepaid expenses</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">426</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">517</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Deposits and other current assets</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">124</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">106</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total prepaid expenses and other current assets</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">714</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">938</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b></b></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 8. PROPERTY, PLANT AND EQUIPMENT </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property, plant and equipment at December 31,
2017 and 2016 consisted of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Property, plant and equipment, net;</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 54%; padding-left: 10pt"><font style="font-size: 10pt">Computer software and hardware</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,239</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">831</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Furniture and equipment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">377</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">424</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Lab and pharmacy equipment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,545</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,559</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Leasehold improvements</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,810</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,836</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8,971</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8,650</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Accumulated depreciation and amortization</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(2,756</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(1,355</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6,215</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,295</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recorded depreciation and amortization
expense of $1,401 and $1,055 during the years ended December 31, 2017 and 2016, respectively.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 9. INTANGIBLE ASSETS AND GOODWILL</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company’s intangible assets at December 31, 2017 consisted
of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">Amortization</font></td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">periods</font></td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Accumulated</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Net</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">(in years)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Cost</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">amortization</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Impairment</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Carrying value</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 30%"><font style="font-size: 10pt">Patents</font></td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: center"><font style="font-size: 10pt">17-19 years</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">365</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">(21</font></td>
<td style="width: 1%"><font style="font-size: 10pt">)</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">344</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Licenses</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">20 years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">50</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">50</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Trademarks</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">Indefinite</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">276</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">276</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Customer relationships</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">3-15 years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,998</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(813</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(15</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,170</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Trade name</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">5 years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">16</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(9</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(1</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">6</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Non-competition clause</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">3-4 years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">294</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(273</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(20</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">State pharmacy licenses</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 10pt">25 years</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">45</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(4</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(28</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">13</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">4,044</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(1,120</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(64</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,860</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Amortization expense for intangible assets for the year ended December
31 was as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">Patents</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">15</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">5</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Customer relationships</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">257</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">255</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Trade name</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Non-competition clause</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">87</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">86</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">State pharmacy licenses</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">364</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">351</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Estimated future amortization expense for the
Company’s intangible assets at December 31, 2017 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Years ending December 31,</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 72%"><font style="font-size: 10pt">2018</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 25%; text-align: right"><font style="font-size: 10pt">228</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2019</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">225</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2020</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">222</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">222</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2022</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">222</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Thereafter</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,741</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,860</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The changes in the carrying value of the Company’s
goodwill during the years ended December 31, 2017 and 2016 were as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%"><font style="font-size: 10pt">Balance at January 1, 2016</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">2,466</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Impairment of ImprimisRx TX</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(239</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Balance at December 31, 2016</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2,227</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">No changes</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Balance at December 31, 2017</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,227</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"> </p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts payable and accrued expenses at December
31, 2017 and 2016 consisted of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%"><font style="font-size: 10pt">Accounts payable</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; text-align: right"><font style="font-size: 10pt">3,241</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; text-align: right"><font style="font-size: 10pt">2,999</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Deferred rent</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">388</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">412</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Accrued interest (see Note 11)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">256</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">116</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Accrued exit fee for notes payable (see Note 11)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">800</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">667</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Building lease liability</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">11</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Total accounts payable and accrued expenses</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">4,685</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">4,205</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: Current portion</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(3,885</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(3,538</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Non-current total accrued expenses</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">800</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">667</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 11. DEBT </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>LSAF Senior Note – 2015</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 11, 2015, the Company entered into a
loan and security agreement (the “Loan Agreement”) with IMMY Funding LLC, an affiliate of Life Sciences Alternative
Funding LLC (the “LSAF”), as lender and collateral agent. Pursuant to the terms of the Loan Agreement, as amended in
January 2016 and December 2016 (see further description of December 2016 amendment below), LSAF made available to the Company a
term loan in the aggregate principal amount of up to $10,000, all of which was drawn on May 11, 2015. The term loan bore interest
at a fixed per-annum rate of 12.5% and allowed for 2% of the interest to be paid-in-kind until December 2016. The Company was permitted
to pay interest only until June 1, 2017. The Company was required to pay interest, plus repayments of the principal amount of the
term loan, in 20 equal monthly installments. All amounts owed under the Loan Agreement, including a final fee of 5% of the aggregate
principal amount of the term loan and prepayment fees of up to 1% of the principal balance were due on January 1, 2019. The Company
incurred expenses of approximately $1,066 in connection with the Loan Agreement. The final fee and expenses were amortized as interest
expense over the term of the debt using the interest method and the related liability of $667 for the final fee, as of December
31, 2016, is included in accrued expenses (see Note 10) in the accompanying consolidated balance sheets.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the Loan Agreement, the
Company issued to LSAF a warrant to purchase up to 125,000 shares of the Company’s common stock, which is exercisable immediately,
has an exercise price of $7.85 per share upon issuance and has a term of 10 years. The relative fair value of the warrants was
approximately $840 and was estimated using the Black-Scholes-Merton option pricing model with the following assumptions: fair value
of the Company’s common stock at issuance of $7.97 per share; ten-year contractual term; 109% volatility; 0% dividend rate;
and a risk-free interest rate of 1.25%. The relative fair value of the warrants was recorded as a debt discount, decreasing notes
payable and increasing additional paid-in capital on the accompanying consolidated balance sheet. The debt discount is being amortized
to interest expense over the term of the debt using the effective interest rate method. As described further, this warrant was
amended in January 2016 and December 2016.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Convertible Senior Note and Exchange Agreement
– 2016</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 22, 2016, the Company entered into
a note purchase agreement (the “NPA”) with, and issued an 8.00% Convertible Senior Secured Note (“Convertible
Note”) in the principal amount of $3,000 to LSAF. Pursuant to the terms of the NPA, on the date thereof, the Company issued
the Convertible Note to LSAF and, as consideration therefor, LSAF paid the Company in cash the full principal amount of the Convertible
Note. The Company incurred expenses of approximately $228 in connection with the Convertible Note and these expenses were recorded
as a debt discount. The debt discount was being amortized as interest expense over the term of the debt using the effective interest
rate method.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the terms of the Convertible Note,
the Company was obligated to pay interest on the principal amount of the Convertible Note monthly in cash at a fixed per-annum
rate of 8.00%, and the Company was obligated to repay the full principal amount of the Convertible Note in cash on May 11, 2021.
The Company was permitted to redeem the Convertible Note prior to its maturity at any time on or after March 1, 2018 for cash purchase
prices equal to 109% - 105% of the outstanding principal amount of the Convertible Note, depending on the date of redemption. The
Convertible Note was initially convertible by the holder at any time into shares of the Company’s common stock at an effective
conversion price of approximately $5.90 and subject to anti-dilution adjustment upon the Company’s first equity financing
while the Convertible Note is outstanding in which it receives gross proceeds of at least $3,000, if such equity financing is completed
at a per share price that is less than the conversion rate of the Convertible Note, and also subject to adjustment upon stock combinations
or splits, certain recapitalizations, stock or cash dividends or other distributions of property or equity rights. Additionally,
in the event of certain change of control events affecting the Company, the Company may be required, at the option of LSAF, to
repurchase the Convertible Note in cash for the greater of 105% of the outstanding principal amount of the Convertible Note or
the value of the shares of common stock issuable upon conversion of the Convertible Note. The fair value of the conversion feature
was $2,322 and was recorded as a debt discount, decreasing notes payable and increasing additional paid-in capital on the accompanying
consolidated balance sheet (see also Note 13). The debt discount is being amortized to interest expense over the term of the debt
using the effective interest method.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection and concurrently with the execution
of the NPA and the issuance of the Convertible Note, the Company and LSAF also entered into an amendment (the “Loan Agreement
Amendment”) to the Loan Agreement (see above). The Loan Agreement Amendment modifies the terms of the Loan Agreement in order
to eliminate the potential borrowing of a second term loan thereunder and to permit the Company to issue the Convertible Note.
Additionally, the Company and LSAF entered into an amendment (the “Warrant Amendment”) to the warrants that were issued
to LSAF in connection with the Loan Agreement. The Warrant Amendment modifies the terms of the warrants in order to reduce the
exercise price thereof to $5.90 per share, which is consistent with the initial conversion rate of the Convertible Note, and to
add an anti-dilution adjustment provision that is consistent with the same such provision in the Convertible Note.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 16, 2016, upon the closing of the
Offering (see Note 13) and pursuant to the anti-dilution adjustment provisions of the Convertible Note and the Warrant Amendment,
the effective conversion price of the Convertible Note was adjusted to approximately $3.60, and the exercise price of the warrants
was adjusted to $3.60 per share (see also Note 13 for further accounting discussion of the warrant exercise price and conversion
provisions and related derivative liabilities). The warrant was amended again in December 2016, to adjust the exercise price to
$1.79 per share, in connection with the Exchange Agreement (described below).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On December 27, 2016, the Company entered into
a third amendment (the “Amendment”) to the Loan Agreement with LSAF. Concurrently with entering into and related to
the Amendment, the Company and LSAF also entered into an Exchange and Discharge Agreement (the “Exchange Agreement”).
The Amendment and Exchange Agreement, among other things, primarily allowed for the Company and LSAF to exchange the Convertible
Note for a $3,000 term loan (the “Term B Loan”). The Term B Loan was issued in exchange for, and not funded separately,
cancellation and discharge of all indebtedness related to the Convertible Note. Terms, conditions and security interests of the
Term B Loan are substantially equal to those of the Loan Agreement. The Amendment also amended certain terms and definitions associated
with prepayment, payment schedule, amortization periods and defined the outstanding principal amounts due to LSAF under the Loan
Agreement and Term B Loan, including any interest that has been paid in kind of the principal balance, in aggregate, as $13,332.
In connection with the Exchange Agreement, during the year ended December 31, 2016, the Company recorded early extinguishment expense
of $1,966 for remaining unamortized debt discounts related to the Convertible Note at the time of the Exchange Agreement.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>SWK Senior Note and LSAF Payoff –
2017</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2017, the Company entered into a term
loan and security agreement in the principal amount of $16,000 (the “SWK Loan Agreement” or “SWK Loan”)
with SWK Funding LLC and its partners (“SWK”), as lender and collateral agent. The SWK Loan Agreement was fully funded
at closing with a five-year term, however, such term may be reduced to four years if certain revenue requirements are not achieved.
Concurrently with the funding, the Company utilized a portion of the SWK Loan funds as full payment to an affiliate of LSAF to
terminate all amounts due to LSAF in connection with the LSAF related loans (Loan Agreement and Term B Loan). In total, including
previously made principal payments, the Company made payments of $13,999 to pay-off the LSAF related loans and expenses, which
also included the previously accrued exit fee, interest paid in kind and other expenses related to the payoff. The Company also
recorded a loss on early extinguishment of debt during the year ended December 31, 2017 of $884 related to the pay-off.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The SWK Loan bears interest at a variable rate
equal to the three-month London Inter-Bank Offered Rate (subject to a minimum of 1.50% and maximum of 3.00%), plus an applicable
margin of 10.50%. The SWK Loan Agreement permits the Company to pay interest only on the principal amount loaned thereunder for
the first six payments (payments are due on a quarterly basis), which interest-only period may be reduced to four payments if the
Company does not meet certain minimum revenue requirements. Following the interest-only period, the Company will be required to
pay interest, plus repayments of the principal amount loaned under the SWK Loan Agreement, in quarterly payments, which shall not
exceed $750 per quarter. All amounts owed under the SWK Loan Agreement, including a final fee equal to 5% of the aggregate principal
amount loaned thereunder, will be due and payable on July 19, 2022, or if certain revenue requirements are not met, July 19, 2021.
The Company may elect to prepay all, but not less than all, of the amounts owed under the SWK Loan Agreement prior to the maturity
date at any time after July 19, 2019. If certain revenue requirements are not met, the Company may be allowed to prepay the loan
from July 19, 2018 to July 19, 2019, provided that a prepayment fee equal to 6% of the principal amount of the loan will also be
due. The Company is also obligated under the SWK Loan Agreement to pay for certain expenses incurred by the SWK Lender through
and after the date of the SWK Loan Agreement, including certain fees and expenses relating to the preparation and administration
of the SWK Loan Agreement. The Company incurred expenses and final fee of approximately $1,282 in connection with the Loan Agreement.
The final fee and expenses are being amortized as interest expense over the term of the debt using the effective interest rate
method and the related liability of $800 for the final fee is included in accrued expenses (see Note 10) in the accompanying consolidated
balance sheet as of December 31, 2017.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the SWK Loan Agreement,
the Company issued to SWK warrants to purchase up to 415,586 shares of the Company’s common stock (the “Lender Warrants”)
with an exercise price of $3.08. In August 2017, the Company and SWK amended the warrants, to allow for the purchase up to 615,386
warrants with an exercise price of $2.08. The Lender Warrants are exercisable immediately, and have a term of 7 years. The Lender
Warrants are subject to a cashless exercise feature, with the exercise price and number of shares issuable upon exercise subject
to change in connection with stock splits, dividends, reclassifications and other conditions. The relative fair value of the Lender
Warrants were approximately $982 and was estimated using the Black-Scholes-Merton option pricing model with the following assumptions:
fair value of the Company’s common stock at issuance of $2.08 per share; seven-year contractual term; 113.5% volatility;
0% dividend rate; and a risk-free interest rate of 1.77%.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the years ended December 31, 2017 and 2016,
debt discount amortization related to notes payable were $811 and $970, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Notes payable at December 31, 2017 were as
follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 72%"><font style="font-size: 10pt">SWK note</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 25%; text-align: right"><font style="font-size: 10pt">16,000</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: Discount on note</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(1,992</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: Current portion</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Long-term portion</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt"><b>$</b></font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt"><b>14,008</b></font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Future minimum payments under notes payable
outstanding at December 31, 2017 are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt"><b>Year Ending December 31,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Amount</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%"><font style="font-size: 10pt">2018</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,947</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2019</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3,657</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2020</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3,440</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3,214</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">2022</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">11,201</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Total minimum payments</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">23,459</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: amount representing interest</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(7,459</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Notes payable, gross</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">16,000</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 12. CAPITAL LEASE OBLIGATION</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On August 9, 2016, the Company entered into
a commercial lease agreement (the “Lease Agreement”) with Essex Capital Corporation (“Essex”). Pursuant
to the terms of the Lease Agreement, the Company sold certain equipment (the “Equipment”) to Essex for a total purchase
price of approximately $2,000, which was then leased back to the Company under a thirty-six month term net basis lease with monthly
payments of approximately $64. The fair value of equipment sold and then leased under the Lease Agreement totaled approximately
$2,000. The lease term may be extended for an additional twelve month period in the event the Company achieves certain financial
milestones. The Company has the right to purchase the Equipment from Essex upon the expiration of the Lease Agreement for a purchase
price equal to the Equipment’s then fair market value, with such fair market value not to exceed fifteen percent of the original
Equipment value on August 9, 2016. If the Equipment is not purchased at the end of the term, the Company may automatically extend
the lease on a month-to-month basis or return the Equipment and terminate the Lease Agreement. The Company expects to purchase
the Equipment at the end of the term of the lease and has accrued the final payment amount of $300. The Company also incurred expenses
of approximately $67 in connection with the Lease Agreement. The issuance costs were recorded as a discount. The discount is being
amortized as interest expense over the term of the lease using the effective interest method. The Company used an interest rate
of 16.8% for calculation of the present value of the future minimum payments under the Lease Agreement. For the years ended December
31, 2017 and 2016, debt discount amortization related to the Lease Agreement was $167 and $90, respectively, and is included in
interest expense in the accompanying consolidated statement of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">At December 31, 2017, future payments under the Company’s
capital lease were as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Amount</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%"><font style="font-size: 10pt">2018</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">773</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">751</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total minimum lease payments</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,524</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: amount representing interest payments</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(96</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Present value of future minimum lease payment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,427</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: unamortized discount</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(110</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,317</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: current portion, net of unamortized discount</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(598</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Capital lease obligation net of current portion and unamortized discount</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">720</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The value of the equipment under capital leases
as of December 31, 2017 and 2016 was $2,070, with related accumulated depreciation of $444 and $293, respectively.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 13. STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Common Stock</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">At December 31, 2017 and 2016, the Company had 90,000,000 shares
of common stock, $0.001 par value, authorized.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Issuances During the Year Ended December
31, 2016</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In March 2016, the Company entered into an
underwriting agreement (the “Underwriting Agreement”) with National Securities Corporation and several other underwriters,
under which the Company sold in a firm-commitment public offering (the “Offering”), 3,335,000 shares of the Company’s
common stock at $3.60 per share. The Offering closed on March 16, 2016. The Company received net proceeds of $11,088, after deducting
the underwriting discount and the offering expenses payable by the Company.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In November 2015, the Company entered into
a Controlled Equity Offering<sup>SM</sup> sales agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.,
as agent (“Cantor Fitzgerald”), pursuant to which the Company may offer and sell, from time to time through Cantor
Fitzgerald, shares of our common stock having an aggregate offering price as set forth in the Sales Agreement and a related prospectus
supplement filed with the Securities and Exchange Commission. The Company agreed to pay Cantor Fitzgerald a cash commission of
3.0% of the aggregate gross proceeds from each sale of shares under the Sales Agreement. The Company sold 57,042 shares of common
stock and received net proceeds of $212, after deducting $20 for sales commission and offering expenses, under the Sales Agreement
during the year ended December 31, 2016.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2016, we issued 75,000 shares of the
Company’s common stock, with a fair value of $302, as a contingent payment related to the acquisition of PC (see Note 17).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In October 2016, the Company issued 16,076
shares of its common stock in connection with RSUs that had been awarded to a non-employee director and had vested, but were not
issued and settled until the resignation of the director in September 2016.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2016, the Company issued 116,291
shares of its common stock to its CEO, Mark L. Baum, in connection with 200,000 RSUs that had vested in May 2016. The issuance
of common stock was net of 83,709 shares of common stock withheld for payroll tax withholdings totaling $144.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2016, the Company entered into
a securities purchase agreement with certain purchasers, which provided for the sale of 5,257,828 Units, with each Unit consisting
of one share of common stock of the Company, and one warrant to purchase one share of common stock (the “Investor Warrants”),
at a price of $1.915 per Unit for aggregate net proceeds of approximately $9,217 after deducting $852 in placement agent fees and
offering expenses (the “PIPE Offering”). The Investor Warrants have an exercise price of $1.79 per share, are non-exercisable
for the first six months and will expire three years from the date of issuance. The Company paid National Securities Corporation
(the “Placement Agent”), in consideration for its services as placement agent for the PIPE Offering, a cash amount
equal to 7.5% of the gross proceeds from the sale of the Units. The Company also issued to the Placement Agent a warrant (the “Agent
Warrant”) to purchase up to 210,313 shares of the Company’s common stock. The Agent Warrant was issued on the same
terms and conditions of the Investor Warrants.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2016, the
Company issued a total of 15,000 shares of common stock as a result of option exercises. The Company received $55 in cash proceeds
for the issuance of the shares of common stock upon the exercise pursuant to exercise provisions of stock options to purchase 15,000
shares of common stock with exercise price of $3.68 per share.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2017, 24,421
shares of the Company’s common stock underlying RSUs issued to directors vested, but the issuance and delivery of these shares
are deferred until the director resigns.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Issuances During the Year Ended December
31, 2017</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In March 2017, we entered into securities purchase
agreements with two accredited investors, which provided for the sale by the Company of 1,312,500 shares of its common stock, at
a price of $2.40 per share (the “Registered Offering”). We received net proceeds of $2,940 after deducting the underwriter
discount of 6% of the gross proceeds from the Registered Offering and other related expenses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In March 2017, the Company issued 25,000 shares
of its restricted common stock, with a fair value of $60, as payment for investor relations related services.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2017, the Company issued 100,000 shares
of common stock as a result of warrant exercises. The Company received cash proceeds of $179 upon the exercise of the warrants
with an exercise price of $1.79.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company sold 557,714 shares of common stock
and received net proceeds of $1,124, after deducting $35 for sales commission and offering expenses, under the Sales Agreement
during the year ended December 31, 2017, leaving an aggregate of $8,040 available for future sales of shares thereunder as of December
31, 2017.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2017, 56,822
shares of the Company’s common stock underlying RSUs issued to directors vested, but the issuance and delivery of these shares
are deferred until the director resigns.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Preferred Stock </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">At December 31, 2017 and 2016, the Company had 5,000,000 shares
of preferred stock, $0.001 par value, authorized and no shares of preferred stock issued and outstanding.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"><b></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Stock Option Plan </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>  </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On September 17, 2007, the Company’s
Board of Directors and stockholders adopted the Company’s 2007 Incentive Stock and Awards Plan, which was subsequently amended
on November 5, 2008, February 26, 2012, July 18, 2012, May 2, 2013 and September 27, 2013 (as amended, the “2007 Plan”).
The 2007 Plan reached its term in September 2017, and we can no longer issue additional awards under this plan, however, options
still outstanding and previously issued under the 2007 Plan will remain outstanding until they are exercised, reach their maturity
or are otherwise cancelled/forfeited. On June 13, 2017, the Company’s Board of Directors and stockholders adopted the Company’s
2017 Incentive Stock and Awards Plan (the “2017 Plan” together with the 2007 Plan, the “Plan”). As of December
31, 2017, the 2017 Plan provide for the issuance of a maximum of 2,000,000 shares of the Company’s common stock. The purpose
of the Plan is to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable,
to encourage a sense of proprietorship and to stimulate an active interest of such persons in the Company’s development and
financial success. Under the Plan, the Company is authorized to issue incentive stock options intended to qualify under Section
422 of the Internal Revenue Code, non-qualified stock options, restricted stock units and restricted stock. The Plan is administered
by the Compensation Committee of the Company’s Board of Directors. The Company had 1,997,500 shares available for future
issuances under the 2017 Plan at December 31, 2017.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Stock Options</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">A summary of stock option activity under the Plan for the year ended
December 31, 2017 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Number of shares</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted Avg. Exercise Price</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted Avg. Remaining Contractual Life</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Aggregate Intrinsic Value</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 37%"><font style="font-size: 10pt">Options outstanding - January 1, 2017</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">2,013,313</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 12%; text-align: right"><font style="font-size: 10pt">6.20</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"> </td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Options granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">538,000</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2.37</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Options exercised</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Options cancelled/forfeit</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(291,334</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">4.45</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Options outstanding - December 31, 2017</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,259,979</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"> $</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">5.51</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">6.11</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">1</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Options exercisable</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">989,664</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"> $</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">5.74</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">6.38</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Options vested and expected to vest</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,137,854</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"> $</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">5.51</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">6.12</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">1</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The aggregate intrinsic value in the table
above represents the total pre-tax amount of the proceeds, net of exercise price, which would have been received by option holders
if all option holders had exercised and immediately sold all options with an exercise price lower than the market price on December
31, 2017, based on the closing price of the Company’s common stock of $1.70 on that date.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During 2017 and 2016, the Company granted stock
options to certain employees, directors and consultants. The stock options were granted with an exercise price equal to the current
market price of the Company’s common stock, as reported by the securities exchange on which the common stock was then listed,
at the grant date and have contractual terms ranging from five to 10 years. Vesting terms for options granted in 2017 and 2016
to employees and consultants typically included one of the following vesting schedules: 25% of the shares subject to the option
vest and become exercisable on the first anniversary of the grant date and the remaining 75% of the shares subject to the option
vest and become exercisable quarterly in equal installments thereafter over three years; quarterly vesting over three years. Certain
option awards provide for accelerated vesting if there is a change in control (as defined in the Plan) and in the event of certain
modifications to the option award agreement.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The fair value of each option award is estimated
on the date of grant using the Black-Scholes-Merton option pricing model. The expected volatility is based on the historical volatilities
of the common stock of the Company and comparable publicly traded companies based on the Company’s belief that it currently
has limited relevant historical data regarding the volatility of its stock price on which to base a meaningful estimate of expected
volatility. The expected term of options granted was determined in accordance with the “simplified approach,” as the
Company has limited, relevant, historical data on employee exercises and post-vesting employment termination behavior. The expected
risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect
at the time of the grant. The financial statement effect of forfeitures is estimated at the time of grant and revised, if necessary,
if the actual effect differs from those estimates. For option grants to employees and directors, the Company assigns a forfeiture
factor of 10%. These factors could change in the future, which would affect the determination of stock-based compensation expense
in future periods. Utilizing these assumptions, the fair value is determined at the date of grant.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below illustrates the fair value
per share determined using the Black-Scholes-Merton option pricing model with the following assumptions used for valuing options
granted to employees:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 62%"><font style="font-size: 10pt">Weighted-average fair value of options granted</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">2.04</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">3.91</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Expected terms (in years)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.81 - 6.11</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.81 - 6.11</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Expected volatility</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">112 - 117</font></td>
<td><font style="font-size: 10pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">101 - 112</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Risk-free interest rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.77 - 2.01</font></td>
<td><font style="font-size: 10pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.07 - 1.70</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Dividend yield</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below illustrates the fair value
per share determined using the Black-Scholes-Merton option pricing model with the following assumptions used for valuing options
granted to consultants:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%"><font style="font-size: 10pt">Weighted-average fair value of options granted</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 21%; text-align: right"><font style="font-size: 10pt">6.18</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Expected terms (in years)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">10</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Expected volatility</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">109</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Risk-free interest rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.06</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Dividend yield</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table summarizes information about stock options outstanding
and exercisable at December 31, 2017:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Options Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Options Exercisable</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Weighted</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Average</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Weighted</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Weighted</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Remaining</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Average</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Average</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Number</font></td>
<td> </td>
<td> </td>
<td colspan="2"><font style="font-size: 10pt">Contractual</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Exercise</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Number</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Exercise</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Range of Exercise Prices</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Life in Years</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Price</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Exercisable</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Price</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 35%; text-align: center"><font style="font-size: 10pt">$1.47 - $2.60</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">584,500</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">8.15</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">2.18</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">197,997</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">2.35</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center"><font style="font-size: 10pt">$3.20 - $4.50</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">539,906</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">7.94</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.97</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">286,855</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.99</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: center"><font style="font-size: 10pt">$5.49 - $6.36</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">106,536</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.61</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">5.95</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">103,092</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">5.97</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center"><font style="font-size: 10pt">$6.64 - $8.99</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,024,007</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">4.05</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">7.98</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">396,690</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">8.18</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 10pt">$42.80</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5,030</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">2.62</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">42.80</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5,030</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">42.80</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: center"><font style="font-size: 10pt">$1.47 - $42.80</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,259,979</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">6.11</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">5.51</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">989,664</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">5.74</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2017, there was approximately
$4,103 of total unrecognized compensation expense related to unvested stock options granted under the Plan. That expense is expected
to be recognized over the weighted-average remaining vesting period of 2.5 years. The stock-based compensation for all stock options
was $1,672 and $2,159 during the years ended December 31, 2017 and 2016, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Restricted Stock Units </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">RSU awards are granted subject to certain vesting
requirements and other restrictions, including performance and market based vesting criteria. The grant-date fair value of the
RSUs, which has been determined based upon the market value of the Company’s common stock on the grant date, is expensed
over the vesting period of the RSUs. Unvested portions of RSUs issued to consultants are remeasured on an interim basis until vesting
criteria is met.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Grants During the Year Ended December 31, 2016</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2016, the Company granted performance-based
RSU awards to its CEO, Mark L. Baum, of up to 1,050,000 performance stock units and to its CFO, Andrew R. Boll, of up to 157,500
performance stock units. The performance stock units will vest on the fifth anniversary of the grant date, subject to Mr. Baum’s
and Mr. Boll’s continued employment with the Company, respectively, and may vest earlier if the Company achieves and maintains
certain stock price targets during the five-year period following the grant date or upon a change in control if the performance-based
equity award is not assumed, continued or substituted for by the acquiring entity. The market-based accelerated vesting criteria
are broken into five equal tranches and require that the Company achieve and maintain certain stock price targets ranging from
$9 per share to $15 per share during the five-year period following the grant date. These market-based accelerated vesting conditions
and share amounts (in aggregate) are set forth below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 62%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Tranche</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 18%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Number of shares</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 18%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Target share price</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Tranche 1</font></td>
<td> </td>
<td><font style="font-size: 10pt">230,000 shares</font></td>
<td> </td>
<td><font style="font-size: 10pt">$9.00 or greater</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Tranche 2</font></td>
<td> </td>
<td><font style="font-size: 10pt">230,000 shares</font></td>
<td> </td>
<td><font style="font-size: 10pt">$10.00 or greater</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Tranche 3</font></td>
<td> </td>
<td><font style="font-size: 10pt">230,000 shares</font></td>
<td> </td>
<td><font style="font-size: 10pt">$12.00 or greater</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Tranche 4</font></td>
<td> </td>
<td><font style="font-size: 10pt">230,000 shares</font></td>
<td> </td>
<td><font style="font-size: 10pt">$14.00 or greater</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Tranche 5</font></td>
<td> </td>
<td><font style="font-size: 10pt">287,500 shares</font></td>
<td> </td>
<td><font style="font-size: 10pt">$15.00 or greater</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For each respective tranche to vest the following
conditions must be met: (i) the Company’s common stock must have an official closing price at or above the target share price
for the respective tranche (each such date, a “Trigger Date”); (ii) during the period that includes the Trigger Date
and the immediately following 19 trading days (the “Measurement Period”), the arithmetic mean of the 20 closing prices
of the Company’s common stock during the Measurement Period must be at or above the target share price for such tranche;
and (iii) with certain limited exceptions, the executive must be in service with the Company through the date of vesting.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="background-color: white">Concurrent
with the issuance of the performance-based restricted stock unit awards, Mr. Baum agreed to forfeit 1,050,000 RSUs subject to performance-based
vesting granted to him in May 2013 and Mr. Boll agreed to forfeit the Boll Performance Equity Award granted to him in February
2015. As a result, the issuance of the performance-based RSUs awarded in April 2016 have been treated as modifications of the RSUs
granted to Mr. Baum in May 2013 and Mr. Boll in February 2015 for accounting purposes. The Company used a lattice binomial model
to estimate a derived service period of 33 months related to the performance-based vesting grants and used the following assumptions:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%"><font style="font-size: 10pt">Market price</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">3.98</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Contractual terms (in years)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.00</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Expected volatility</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">102</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Risk-free interest rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.04</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Dividend yield</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2016, the
Company granted an aggregate of 63,450 RSUs to its non-employee directors valued at $250. These RSUs vest in equal quarterly installments
over a one-year period subject to the director’s continued service at the vesting date, but the issuance and delivery of
these shares are deferred until the director resigns.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Grants During the Year Ended December 31, 2017</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2017, the
Company granted an aggregate of 62,892 RSUs to its non-employee directors valued at $200. These RSUs vest in equal quarterly installments
over a one-year period subject to the director’s continued service at the vesting date, but the issuance and delivery of
these shares are deferred until the director resigns.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of the Company’s RSU activity
and related information for the year ended December 31, 2017 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">  </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Number of RSUs</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted Average Grant Date Fair Value</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 62%"><font style="font-size: 10pt">RSUs unvested - January 1, 2017</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">1,292,876</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">2.43</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">RSUs granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">62,892</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3.18</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">RSUs vested</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(56,822</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.94</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">RSUs cancelled/forfeit</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">RSUs unvested at December 31, 2017</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,298,946</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2.42</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2017, the total unrecognized
compensation expense related to unvested RSUs was approximately $1,326 which is expected to be recognized over a weighted-average
period of 0.9 years, based on estimated vesting schedules. The stock-based compensation for RSUs was $1,211 and $1,539 during the
years ended December 31, 2017 and 2016, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recorded stock-based compensation
(including issuance of common stock for services and accrual for stock-based compensation) related to equity instruments granted
to employees, directors and consultants as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">Employees - selling and marketing</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">449</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">498</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Employees - general and administrative</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,229</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,954</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Directors - general and administrative</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">205</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">221</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Consultants - selling and marketing</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">60</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Other - general and administrative</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">115</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,943</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,788</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Warrants</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">From time to time, the Company issues warrants
to purchase shares of the Company’s common stock to investors, lenders (see Note 11), underwriters and other non-employees
for services rendered or to be rendered in the future.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">A summary of warrant activity during the year ended December 31,
2017 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Number of Shares Subject to Warrants Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted Avg. Exercise Price</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%"><font style="font-size: 10pt">Warrants outstanding - January 1, 2017</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 18%; text-align: right"><font style="font-size: 10pt">5,748,829</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; text-align: right"><font style="font-size: 10pt">1.91</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">615,386</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2.08</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Exercised</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(100,000</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.79</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Expired</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Warrants outstanding and exercisable - December 31, 2017</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6,264,215</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">1.93</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Weighted average remaining contractual life of the outstanding warrants in years - December 31, 2017</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.52</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below illustrates the fair value
per share determined by the Black-Scholes-Merton option pricing model with the following assumptions used for valuing warrants
granted during the year ended December 31, 2016 related to settlement agreements:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%"><font style="font-size: 10pt">Weighted-average fair value of warrants granted</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">2.88</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Expected terms (in years)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Expected volatility</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">106</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Risk-free interest rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.79</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Dividend yield</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below illustrates the fair value
per share determined by the Black-Scholes-Merton option pricing model with the following assumptions used for valuing warrants
granted during the year ended December 31, 2017 related to loan agreements:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%"><font style="font-size: 10pt">Weighted-average fair value of warrants granted</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1.70</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Expected terms (in years)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">7.00</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Expected volatility</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">113.5</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Risk-free interest rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.77</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Dividend yield</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">All warrants outstanding as of December 31, 2017 are included in
the following table:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="9" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Warrants Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="5" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Warrants Exercisable</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Warrants</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Exercise</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Warrants</font></td>
<td> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">Expiration</font></td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Warrant Series</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Issue Date</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Price</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Exercisable</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Date</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 29%"><font style="font-size: 10pt">Lender warrants</font></td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"><font style="font-size: 10pt">5/11/2015</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"><font style="font-size: 10pt">125,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 12%; text-align: right"><font style="font-size: 10pt">1.79</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"><font style="font-size: 10pt">125,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"><font style="font-size: 10pt">5/11/2025</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Underwriter warrants</font></td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2/7/2013</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">55,688</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">5.25</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">55,688</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2/7/2018</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Settlement warrants</font></td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8/16/2016</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">40,000</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.75</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">40,000</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8/16/2021</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Warrants issued to investor relations consultant</font></td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">7/19/2013</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">60,000</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">8.50</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">60,000</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">7/19/2018</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Placement Agent Warrants</font></td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">12/27/2016</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">210,313</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">1.79</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">210,313</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">12/27/2019</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">PIPE Investor Warrants</font></td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">12/27/2016</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5,157,828</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">1.79</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5,157,828</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">12/27/2019</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Lender warrants (see Note 11)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">7/19/2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">615,386</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">2.08</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">615,386</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">7/19/2024</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6,264,215</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$</font></td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">1.93</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6,264,215</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 14. DERIVATIVE INSTRUMENTS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2016, the
Company modified certain common stock purchase warrants issued in conjunction with debt which are detachable, or free standing,
instruments. The warrants were considered a derivative liability upon modification and the estimated fair value of the warrants
was reclassified from equity to liabilities. In addition, the Company recorded a derivative liability and debt discount associated
with the estimated fair value of the embedded conversion feature in the Convertible Note (see Note 11). Both instruments contained
a provision which allowed for one-time adjustments to their exercise or conversion prices. The one-time adjustment occurred upon
the closing of the Company’s underwritten public offering of its common stock (see Note 13), on March 16, 2016, whereby the
conversion and exercise prices were adjusted from $5.90 to $3.60 per share. At the time of the one-time adjustment, the Company
reclassified the derivative liabilities to equity based on their then estimated fair value at that time. The Company estimated
the fair value of the derivative liabilities utilizing Level 3 inputs. The Company used the Black-Scholes-Merton option pricing
model as it embodies all of the requisite assumptions (including trading volatility, remaining term to maturity, market price,
strike price, and risk-free rates) necessary to value these instruments.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below illustrates the fair value
per share determined by the Black-Scholes-Merton option pricing model with the following assumptions used for valuing derivative
liabilities:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 79%"><font style="font-size: 10pt">Expected volatility</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 18%; text-align: right"><font style="font-size: 10pt">103 - 111</font></td>
<td style="width: 1%"><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Risk-free interest rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.22 - 1.70</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Dividend yield</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company estimated the expected terms based
on the remaining contractual life of the instruments on the date of the fair value measurement. The warrant expires on May 11,
2025 and the convertible note had an original maturity date of May 11, 2021.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table provides a reconciliation
of all liabilities measured at fair value using Level 3 significant unobservable inputs:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Warrant derivative liability:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Balance at January 1, 2016</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%"><font style="font-size: 10pt">Modification of warrant and reclassification from equity to liabilities</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">675</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Change in fair value</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(211</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Reclassification from liabilities to equity upon closing of public equity offering</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(464</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Balance at December 31, 2016</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Embedded conversion feature derivative liability:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Balance at January 1, 2016</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Embedded conversion feature in Convertible Note issued</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,322</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Change in fair value</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">324</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Reclassification from liabilities to equity upon closing of public equity offering</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(2,646</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Balance at December 31, 2016</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"><b> </b></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 15. INCOME TAXES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company is subject to taxation in the United
States, California, New Jersey, Texas and Pennsylvania. The provision for income taxes for the years ended December 31, 2017 and
2016 are summarized below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Current:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Federal</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%; padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">State</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"> </td>
<td style="width: 20%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"> </td>
<td style="width: 20%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">8</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Total current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">8</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Deferred:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Federal</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">6,474</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">(5,623</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">State</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(283</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(1,713</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Change in valuation allowance</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(7,126</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">7,225</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Total deferred</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(935</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(111</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Income tax provision (benefit)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(930</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(103</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Income tax expense for the years ended December
31, 2017 and 2016, are recorded in the general and administrative expenses line item in the accompanying consolidated statements
of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A reconciliation of income taxes computed by
applying the statutory U.S. income tax rate to the Company’s loss before income taxes to the income tax provision is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">U.S. federal statutory tax rate</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">35.00</font></td>
<td style="width: 1%"><font style="font-size: 10pt">%</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">35.00</font></td>
<td style="width: 1%"><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Benefit of lower tax brackets</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(1.00</font></td>
<td><font style="font-size: 10pt">)%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(1.00</font></td>
<td><font style="font-size: 10pt">)%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">State tax benefit, net</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.60</font></td>
<td><font style="font-size: 10pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.08</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Research and development credits</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.00</font></td>
<td><font style="font-size: 10pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.00</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Employee stock based compensation</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(0.84</font></td>
<td><font style="font-size: 10pt">)%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(1.47</font></td>
<td><font style="font-size: 10pt">)%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Loss on debt conversion</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(2.39</font></td>
<td><font style="font-size: 10pt">)%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.00</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Capitalization of Subsidiary</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.00</font></td>
<td><font style="font-size: 10pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.00</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Change in Rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(62.97</font></td>
<td><font style="font-size: 10pt">)%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.00</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Other</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3.04</font></td>
<td><font style="font-size: 10pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(0.18</font></td>
<td><font style="font-size: 10pt">)%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Valuation allowance</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">34.82</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">%</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(31.89</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Effective income tax rate</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7.26</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">%</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.54</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">%</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred tax assets and liabilities reflect
the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows
(in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Deferred tax assets (liabilities):</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 54%; padding-left: 10pt"><font style="font-size: 10pt">NOL’s</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">17,405</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">21,555</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Depreciation and amortization</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">58</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">199</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Other</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">351</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">398</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Research & development credits</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">596</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">556</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Deferred stock compensation</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,534</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3,875</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Basis Difference in Eton</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(985</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Park stock purchase identifiable intangibles</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(501</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(936</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Unrealized gain or loss on investments</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 20pt"><font style="font-size: 10pt">Total deferred tax assets, net</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">19,458</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">25,647</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Valuation allowance</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(19,458</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(26,583</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Net deferred tax liabilities</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(936</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Realization of deferred tax assets is dependent
upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been
fully offset by a valuation allowance. The valuation allowance decreased by approximately $7.1 and increased by approximately $7.2
during 2017 and 2016, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2017, the Company had net
operating loss carryforwards for federal income tax purposes of approximately $62,899 and federal research and development tax
credits of approximately $354. Under new tax law, federal NOLs can be carried forward indefinitely for losses incurred after December
31, 2017. Losses incurred prior to the effective date are still subject to the 20 year carryforward. The federal research credits
will expire beginning in the year 2026. As of December 31, 2017, the Company had net operating loss carryforwards for state income
tax purposes of approximately $59,215 which expire beginning in the year 2017 and state research and development tax credits of
approximately $305 which do not expire.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In March 2016, the FASB issued ASU 2016-09,
<i>Improvement to Employee Share – Based Payment Accounting</i>. The new standard contains several amendments that will simplify
the accounting for employee share-based payment transactions. The changes in the new standard eliminate the accounting for excess
tax benefits to be recognized in additional paid-in capital and tax deficiencies recognized either in income tax provision or in
additional paid-in capital. The Company’s deferred tax asset at December 31, 2017 did not include any excess tax benefits
from employee stock option exercises, which are a component of the federal and state net operating loss carryforwards and on a
go forward basis the excess tax benefits will be recognized as a component of income tax expense.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Utilization of the net operating losses may
be subject to substantial annual limitation due to federal and state ownership change limitations provided by the Internal Revenue
Code and similar state provisions. Such annual limitations could result in the expiration of the net operating losses ad credits
before their utilization.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In June 2006, the FASB issued interpretation
ASC 740-10-50, <i>Accounting for Uncertainty in Income Tax</i>. This pronouncement clarifies the accounting for uncertainty in
income taxes recognized in an enterprise’s financial statements in accordance with ASC 740-10-50, <i>Accounting for Income
Taxes</i>. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken in the tax return. ASC 740 also provides guidance on derecognition
of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure and transaction.
The Company adopted ASC 740-10-50 effective January 1, 2009. In accordance with ASC 740-10-50, the Company is classifying interest
and penalties as a component of tax expense.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company did not have any unrecognized tax
benefits as of December 31, 2017 and 2016, all of which is offset by a full valuation allowance. These unrecognized tax benefits,
if recognized, would not affect the effective tax rate. There was no interest or penalties accrued at the adoption date and at
December 31, 2016.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A reconciliation of the change in the UTB balance
from January 1, 2017 to December 31, 2017 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Fed & State Tax</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 72%"><font style="font-size: 10pt">Balance at January 1, 2017</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 25%; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Additions for tax positions related to current year</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Additions/(reductions) for tax positions related to prior years</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Balance at December 31, 2017</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt"><b>Total unrecognized tax benefits as of December 31, 2017</b></font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On December 27, 2017, the United States Government
passed new tax legislation that, among other provisions, will lower the corporate tax rate from 35% to 21%. In addition to applying
the new lower corporate tax rate in 2018 and thereafter to any taxable income the Company may have, the legislation affects the
way the Company can use and carryforward net operating losses previously accumulated and results in a revaluation of deferred
tax assets and liabilities recorded on our consolidated balance sheet. Given the current deferred tax assets are offset by a full
valuation allowance, these changes will have no net impact on the consolidated balance sheet. However, when the Company becomes
profitable, it will receive a reduced benefit from such deferred tax assets. The effect of the legislation was a reduction in
the deferred tax assets and the corresponding valuation allowance of approximately $8,059.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 16. EMPLOYEE SAVINGS PLAN</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has established an employee savings
plan pursuant to Section 401(k) of the Internal Revenue Code, effective January 1, 2014. The plan allows participating employees
to deposit into tax deferred investment accounts up to 100% of their salary, subject to annual limits. The Company makes certain
matching contributions to the plan in amounts up to 4% of the participants’ annual cash compensation, subject to annual
limits. The Company contributed approximately $288 and $248 to the plan during the years ended December 31, 2017 and 2016, respectively.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 17. COMMITMENTS AND CONTINGENCIES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Contingent Acquisition Obligation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On April 1, 2014, the Company acquired all
of the outstanding membership interests of Pharmacy Creations, LLC (“PC”). The sellers of PC, were entitled to receive
certain payments, including contingent consideration upon certain conditions. The estimated fair value of the contingent acquisition
obligation was $483 and included in the contingent acquisition obligation in the accompanying balance sheet at December 31, 2015.
During May 2016, the Company paid the sellers of PC $100 in cash and 75,000 shares of its common stock with a fair value of $302,
as payment in full related to the contingent acquisition obligation. Related to the payment of the contingent acquisition obligation
the Company recorded a gain of $81 during the year ended December 31, 2016, which is included in other income, net in the accompanying
consolidated statement of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Operating Leases</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2014, the Company entered into a lease
agreement for 7,565 square feet of office space that commenced on September 1, 2014. In May 2017, the Company entered into an amended
lease agreement, to lease an additional 2,635 square feet (10,200 square feet in total). Monthly rent following the amendment is
$29, with a 3% increase in the base rent amount on an annual basis. The lease agreement allows for the monthly rent amount to be
abated for two months at various times during the lease agreement and expires on December 31, 2021, and includes an option to extend
the lease through December 31, 2027.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2015, the Company entered into a
commercial lease agreement, for the lease to Park of approximately 4,500 square feet of laboratory and office space. The monthly
rent amount is $10 and includes annual increases of approximately 3%. The current lease term expires on December 31, 2020 and includes
2 options that allow for the lease term to be extended 10 additional years beyond the stated expiration date.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2015, the Company entered into
a lease agreement for approximately 8,600 square feet of laboratory, warehouse and office space in Ledgewood, New Jersey. The Company
amended the lease agreement in July 2017, to add approximately 7,000 square feet of additional space. The lease term expires on
July 31, 2022, and includes 2 options that allow for the lease term to be extended 10 additional years beyond the stated expiration
date. The monthly rent amount is $15 and includes annual increases of approximately 3.75%, and the lease allowed for the first
five months of rent amounts to be abated.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Rent expense for the years ended December 31,
2017 and 2016 was $649 and $668, respectively. The following represents future annual minimum lease payments, as of December 31,
2017:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 67%"><font style="font-size: 10pt">2018</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 30%; text-align: right"><font style="font-size: 10pt">697</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2019</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">697</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2020</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">697</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">571</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">2022</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">111</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Total</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt"><b>$</b></font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt"><b>2,773</b></font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Legal</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Urigen, et. al, Litigation</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 2014, the Company entered into a
license agreement (the “Urigen License”) with Urigen Pharmaceuticals, Inc. (“Urigen”) for a license of
certain U.S. patents and patent applications to develop and sell in the U.S. Urigen’s URG101 product, a heparin and alkalinized
lidocaine compounded formulation for the prevention or treatment of disorders of the lower urinary tract. The Company, as the plaintiff,
filed a civil action in the San Diego Superior Court against Urigen in December 2015, wherein the Company outlined serious concerns
regarding material failures and inaccuracies of the representation and warranties provided by Urigen in the Urigen License, which
have affected the Company’s ability to realize the expected benefit of the Urigen License. Urigen filed a cross-complaint
in April 2016 for breach of contract asserting unpaid royalties totaling $698 and requesting a decree to cancel the Urigen Agreement.
The Company filed another complaint in May 2016 with the U.S. District Court for the Southern District of California for declaratory
judgment of the invalidity of the core patent filing related to Urigen’s URG 101. In June 2016, the Company received notice
from Urigen of their election to terminate the Urigen License. In November 2016, the Company and Urigen entered into a settlement
and mutual release agreement whereby all parties agreed to settle all disputes related to the Urigen License and associated litigation
matters, the Company agreed to make a one-time payment to Urigen related to past sales of Urigen’s URG101 product and to
cease selling the URG101 product over a certain period of time. During the year ended December 31, 2016, the Company recorded a
gain related to the settlement with Urigen totaling $551 which is included in other income, net in the accompanying consolidated
statement of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Corwin, Kammer, et. al. Litigation</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2014, Robert Kammer (“Kammer”),
the Company’s Chairman of the Board, filed a lawsuit in the San Diego Superior Court against Merlyn Corwin (“Corwin”)
to enforce his contract rights related to a settlement agreement the parties had previously entered into involving shares of the
Company’s common stock. Corwin filed an answer to the complaint in March 2014 and in June 2014 filed the first amended cross
complaint adding the Company as a cross-defendant. In August 2014, Corwin filed a seconded amended cross complaint (the “SACC”)
which added Mark Baum (“Baum”), the Company’s Chief Executive Officer, and an individual who previously provided
consulting services to the Company as additional cross-defendants. The SACC alleged numerous causes of action including securities
fraud, concealment, misrepresentations, inducement of misrepresentations, rescission – undue influence, intentional infliction
of emotional distress and declaratory relief of invalidity of the settlement agreement. In September 2014, the Company and Baum
filed an anti-strategic lawsuit against public participation motion (“Anti-SLAPP”), arguing all allegations in the
SACC were based on protected activity under the litigation privilege. Kammer also filed an Anti-SLAPP motion in October 2014. In
November 2014, the Company, Baum and Kammer were granted both Anti-SLAPP motions, with the ruling judge deciding that the parties
successfully demonstrated that the allegations arose from activity protected by the litigation privilege. The judge further found
that the evidence Corwin relied upon in her arguments failed to demonstrate a probability that she could prevail on any of the
claims. The court then ordered Corwin to pay the Company’s and Baum’s attorney fees and the case was dismissed. In
May 2015, Corwin filed an appeal and in November 2015, the appellate court reversed the Anti-SLAPP decision of the trial court.
In April 2016, the Company and Baum filed a demurrer to the SACC. The court ordered a ruling on the demurrer in June 2016, dismissing
most of the causes of action against Baum and the Company, but leaving the claim for fraud by concealment and intentional infliction
of emotional distress. In August 2016, all parties related to this litigation entered into a settlement and mutual release agreement,
whereby all parties agreed to settle all disputes and release one another of any legal claims. The Company issued 40,000 at-the-money
warrants (see Note 13) as part of the settlement consideration. The estimated fair value of the warrant (see Note 13) and associated
legal expenses were recorded in general and administrative expenses during the year ended December 31, 2016 in the accompanying
consolidated statement of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Dr. Sobol Litigation</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2016, Louis L. Sobol, M.D. (“Sobol”)
filed a lawsuit in the U.S. District Court for the Eastern District of Michigan, Southern Division against the Company, asserting
claims on behalf of himself and an as-yet-uncertified class of consumers. The claims allege violations under the Telephone Consumer
Protection Act, 47 U.S.C. § 227 via the Company’s alleged transmittal of advertisements to its clients via facsimile.
The case is currently in the discovery phase, and the Company expects Dr. Sobol to likely request the court to certify the class
at some point, possibly during 2018. The Company believes the claims are frivolous and have previously and will continue to dispute
all claims against it and intends to vigorously defend these allegations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Allergan USA Litigation</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In September 2017, Allergan USA, Inc. (“Allergan”)
filed a lawsuit in the U.S. District Court for the Central District of California against the Company, primarily claiming violations
under the federal Lanham Act and other state laws. In December, the Company filed counterclaims against Allergan alleging similar
violations under the federal Lanham Act and other state laws and the case is currently in the beginning stages of discovery, with
a trial date set for April 2019. The Company has previously and continues to dispute all claims against it and intends to vigorously
defend these allegations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Spectrum Litigation</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2018, the Company filed a complaint
against Spectrum Laboratory Products, Inc., Spectrum Chemical Manufacturing Corp. and Spectrum Pharmacy Products, Inc. (collectively
“Spectrum”) in the Los Angeles County Superior Court asserting claims for breach of contract, breach of implied covenant
of good faith and fair dealing, violation of California Commercial Code Section 2101 and fraud. The claims stem from prior business
dealings between the Company and Spectrum and allege false representation by Spectrum regarding their products, fraudulent labeling
and misrepresentations of approved product usages. The complaint has been filed with the Court and to date, Spectrum has provided
the Company no response nor filed any answer with the Court. We intend to fully purse any and all legal remedies available to us
against Spectrum.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>General and Other</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In the ordinary course of business, the Company
may face various claims brought by third parties and the Company may, from time to time, make claims or take legal actions to assert
the Company’s rights, including intellectual property disputes, employment, contractual disputes and other commercial disputes.
Any of these claims could subject the Company to litigation. Management believes the outcomes of currently pending claims are not
likely to have a material effect on the Company’s consolidated financial position and results of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2017, the
Company estimated and accrued costs totaling $450 related to expected settlement costs for litigation matters, which is recorded
in accounts payable and accrued expenses in the consolidated balance sheets.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Indemnities</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition to the indemnification provisions
contained in the Company’s charter documents, the Company generally enters into separate indemnification agreements with
each of the Company’s directors and officers. These agreements require the Company, among other things, to indemnify the
director or officer against specified expenses and liabilities, such as attorneys’ fees, judgments, fines and settlements,
paid by the individual in connection with any action, suit or proceeding arising out of the individual’s status or service
as the Company’s director or officer, other than liabilities arising from willful misconduct or conduct that is knowingly
fraudulent or deliberately dishonest, and to advance expenses incurred by the individual in connection with any proceeding against
the individual with respect to which the individual may be entitled to indemnification by the Company. The Company also indemnifies
its lessors in connection with its facility leases for certain claims arising from the use of the facilities. These indemnities
do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically,
the Company has not incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities
in the accompanying consolidated balance sheets.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Insurance Claims </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In June 2016, the Company’s Texas based
facility was damaged related to a malfunction with the property’s sprinkler system. The Company commenced restoration efforts
and filed claims for damages under its insurance policies, including claims related to business interruption. During the year ended
December 31, 2016, the Company recorded the insurance claim of $861 in other income, net in the accompanying consolidated statement
of operations which reflected amounts paid by its insurance carrier related to the claims filed for property damage and business
interruption.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Klarity License Agreement – Related
Party</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2017, the Company entered into a license
agreement (the “Klarity License Agreement”) with Richard L. Lindstrom, M.D., a member of its Board of Directors. Pursuant
to the terms of the Klarity License Agreement, the Company licensed certain intellectual property and related rights from Dr. Lindstrom
to develop, formulate, make, sell, and sub-license the topical ophthalmic solution Klarity used to protect and rehabilitate the
ocular surface (the “Klarity Product”).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under the terms of the Klarity License Agreement,
the Company is required to make royalty payments to Dr. Lindstrom ranging from 3% to 6% of net sales, dependent upon the final
formulation of the Klarity Product sold. In addition, the Company is required to make certain milestone payments to Dr. Lindstrom
including: (i) an initial payment of $50 upon execution of the Klarity License Agreement, (ii) a second payment of $50 following
the first $50 in net sales of the Klarity Product; and (iii) a final payment of $50 following the first $100 in net sales of the
Klarity Product. All of the above referenced milestone payments are payable at the Company’s election in cash or shares of
the Company’s restricted common stock. Dr. Lindstrom was paid $50 in cash during the year ended December 31, 2017, and was
due an additional $19 at December 31, 2017. Dr. Lindstrom is a member of the Company’s Board of Directors, chairman of its
Compensation Committee and a member of its Nomination and Corporate Governance Committee.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Sales and Marketing Agreements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During 2017, the Company entered various sales
and marketing agreements with certain organizations, to provide exclusive sales and marketing representation services to Imprimis
in select geographies in the U.S., in connection with our ophthalmic compounded formulations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under the terms of the sales and marketing
agreements, the Company is required to make commission payments to equal to 10% - 14% of net sales for products above and beyond
the initial existing sales amounts. In addition, the Company is required to make periodic milestone payments to certain organizations
in shares of the Company’s restricted common stock if net sales in the assigned territory reach certain future levels by
the end of their terms, as applicable. No stock based payments were made and $183 were incurred under these agreements for commission
expenses during the year ended December 31, 2017.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Asset Purchase, License and Related Agreements
</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has acquired and sourced intellectual
property rights related to certain proprietary innovations from certain inventors and related parties (the “Inventors”)
through multiple asset purchase agreements, license agreements, strategic agreements and commission agreements. In general, these
agreements provide that the Inventors will cooperate with the Company in obtaining patent protection for the acquired intellectual
property and that the Company will use commercially reasonable efforts to research, develop and commercialize a product based on
the acquired intellectual property. In addition, the Company has acquired a right of first refusal on additional intellectual property
and drug development opportunities presented by these Inventors.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In consideration for the acquisition of the
intellectual property rights, the Company is obligated to make payments to the Inventors based on the completion of certain milestones,
generally consisting of: (1) a payment payable within 30 days after the issuance of the first patent in the United States arising
from the acquired intellectual property (if any); (2) a payment payable within 30 days after the Company files the first investigational
new drug application (“IND”) with the FDA for the first product arising from the acquired intellectual property (if
any); (3) for certain of the Inventors, a payment payable within 30 days after the Company files the first new drug application
with the FDA for the first product arising from the acquired intellectual property (if any); and (4) certain royalty payments
based on the net receipts received by the Company in connection with the sale or licensing of any product based on the acquired
intellectual property (if any), after deducting (among other things) the Company’s development costs associated with such
product. If, following five years after the date of the applicable asset purchase agreement, the Company either (a) for certain
of the Inventors, has not filed an IND or, for the remaining Inventors, has not initiated a study where data is derived, or (b)
has failed to generate royalty payments to the Inventors for any product based on the acquired intellectual property, the Inventors
may terminate the applicable asset purchase agreement and request that the Company re-assign the acquired technology to the Inventors.
$108 and $3 were accrued in accounts payable and accrued expenses under these agreements for royalty expenses incurred during
the years ended December 31, 2017 and 2016, respectively.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 18. SEGMENT INFORMATION AND CONCENTRATIONS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company operates the business on the basis
of a single reportable segment, which is the business of developing proprietary drug therapies and providing such therapies through
sterile and non-sterile pharmaceutical compounding services and drug development. While the Company is described as having certain
individual businesses, in general, those business operations often overlap, decisions and resources may be intermingled between
components and discrete financial information about the businesses, on an individual basis, is not available. The Company’s
chief operating decision-maker is the Chief Executive Officer, who evaluates the Company as a single operating segment.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company categorizes revenues by geographic
area based on selling location. All operations are currently located in the United States; therefore, total revenues for 2017 and
2016 are attributed to the United States. All long-lived assets at December 31, 2017 and 2016 are located in the United States.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company sells its compounded formulations
to a large number of customers. No single customer contributed 10% or more of the Company’s total pharmacy sales in the years
ended December 31, 2017 and 2016.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company receives its active pharmaceutical
ingredients from three main suppliers during the years ended December 31, 2017 and 2016. These suppliers collectively accounted
for 68% and 69% of drug and chemical purchases during the years ended December 31, 2017 and 2016, respectively.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 19. SUBSEQUENT EVENTS </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has performed an evaluation of
events occurring subsequent to December 31, 2017 through the filing date of this Annual Report on Form 10-K (the “Annual
Report”). Based on its evaluation, nothing other than the events described below needs to be disclosed.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2018, the Company sold 33,800 shares
of common stock under the Sales Agreement and received net proceeds of $57, after deducting offering related expenses and commissions.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2018, the Company issued 25,273
shares of its restricted common stock, with a fair value of $44, in lieu of a cash payment for royalty expenses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Restricted stock units granted in February
2015 to Andrew R. Boll, the Company’s Chief Financial Officer, vested, and in February 2018, 30,000 shares the Company’s
common stock were issued to Mr. Boll.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Restricted stock units granted in February
2015 to John P. Saharek, the Company’s Chief Commercial Officer, vested, and in February 2018, 30,000 shares the Company’s
common stock were issued to Mr. Saharek.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In March 2018, the Company issued 35,427 shares
of its restricted common stock, with a fair value of $64, in lieu of a cash payment for royalty expenses.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Basis of Presentation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Imprimis has prepared the accompanying consolidated
financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The accompanying consolidated financial statements include the accounts of the Company and its wholly and majority owned subsidiaries.
All intercompany accounts and transactions have been eliminated in consolidation.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Use of Estimates</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of financial statements in
conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and
expenses during the reporting periods. Significant estimates made by management are, among others, allowance for doubtful accounts
and contractual adjustments, realizability of inventories, valuation of deferred taxes, goodwill and intangible assets, recoverability
of long-lived assets and goodwill, valuation of contingent acquisition obligations and deferred acquisition obligations, valuation
of notes payable and derivative liabilities, and valuation of stock-based transactions with employees and non-employees. Actual
results could differ from those estimates.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Liquidity</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has incurred significant operating
losses and negative cash flows from operations since its inception. The Company incurred net losses of $11,985 and $19,087 for
the years ended December 31, 2017 and 2016, respectively, and had an accumulated deficit of $88,836 and $76,851 as of December
31, 2017 and 2016, respectively. In addition, the Company used cash in operating activities of $8,803 and $11,215 for the years
ended December 31, 2017 and 2016, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">While there is no assurance, the Company believes
its existing cash resources and restricted cash of approximately $4,219 at December 31, 2017, along with proceeds from the Sales
Agreement (see Note 13) will be sufficient to sustain the Company’s planned level of operations for at least the next twelve
months. However, estimates of operating expenses and working capital requirements could be incorrect, and the Company could use
its cash resources faster than anticipated. Further, some or all of the ongoing or planned activities may not be successful and
could result in further losses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company may seek to increase liquidity
and capital resources by one or more of the following which may include, but are not limited to: the sale of assets and/or businesses,
obtaining financing through the issuance of equity, debt, or convertible securities; and working to increase revenue growth through
sales. There is no guarantee that the Company will be able to obtain capital when needed on terms it deems as acceptable, or at
all.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Revenue Recognition and Deferred Revenue</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes revenues when all of
the following criteria have been met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling
price is fixed and determinable; and (4) collectability is reasonably assured.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Product Revenues</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Determination of criteria (3) and (4) is based
on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability
of those amounts. Estimated returns and allowances and other adjustments are provided for in the same period during which the related
sales are recorded. The Company will defer any revenues received for a product that has not been delivered or is subject to refund
until such time that the Company and the customer jointly determine that the product has been delivered and no refund will be required.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>License Revenues</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">License arrangements may consist of non-refundable
upfront license fees, data transfer fees, research reimbursement payments, exclusive license rights to patented or patent pending
compounds, technology access fees, and various performance or sales milestones. These arrangements can be multiple element arrangements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Non-refundable fees that are not contingent
on any future performance by the Company and require no consequential continuing involvement on the part of the Company are recognized
as revenue when the license term commences and the licensed data, technology, compounded drug preparation and/or other deliverable
is delivered. Such deliverables may include physical quantities of compounded drug preparations, design of the compounded drug
preparations and structure-activity relationships, the conceptual framework and mechanism of action, and rights to the patents
or patent applications for such compounded drug preparations. The Company defers recognition of non-refundable fees if it has
continuing performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable
fee has no utility to the licensee and that are separate and independent of the Company’s performance under the other elements
of the arrangement. In addition, if the Company’s continued involvement is required, through research and development services
that are related to its proprietary know-how and expertise of the delivered technology or can only be performed by the Company,
then such non-refundable fees are deferred and recognized over the period of continuing involvement. Guaranteed minimum annual
royalties are recognized on a straight-line basis over the applicable term.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Cost of Sales</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cost of sales includes direct and indirect
costs to manufacture formulations and other products sold, including active pharmaceutical ingredients, personnel costs, packaging,
storage, royalties (see Note 17), shipping and handling costs and the write-off of obsolete inventory.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Research and Development</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company expenses all costs related to
research and development as they are incurred. Research and development expenses consist of expenses incurred in performing research
and development activities, including salaries and benefits, other overhead expenses, and costs related to clinical trials, contract
services and outsourced contracts.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Debt Issuance Costs and Debt Discount</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Debt issuance costs and the debt discount
are recorded net of notes payable and capital lease obligations in the consolidated balance sheets. Amortization expense of debt
issuance costs and the debt discount is calculated using the effective interest method over the term of the debt and is recorded
in interest expense in the accompanying consolidated statements of operations.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Intellectual Property</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The costs of acquiring intellectual property
rights to be used in the research and development process, including licensing fees and milestone payments, are charged to research
and development expense as incurred in situations where the Company has not identified an alternative future use for the acquired
rights, and are capitalized in situations where we have identified an alternative future use for the acquired rights. Patents
and trademarks are recorded at cost and capitalized at a time when the future economic benefits of such patents and trademarks
become more certain (see Goodwill and Intangible Assets). The Company began capitalizing certain costs associated with acquiring
intellectual property rights during 2015, if costs are not capitalized they are expensed as incurred.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Income Taxes</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As part of the process of preparing the Company’s
consolidated financial statements, the Company must estimate the actual current tax liabilities and assess permanent and temporary
differences that result from differing treatment of items for tax and accounting purposes. The temporary differences result in
deferred tax assets and liabilities, which are included within the consolidated balance sheets. The Company must assess the likelihood
that the deferred tax assets will be recovered from future taxable income and, to the extent the Company believes that recovery
is not more likely than not, a valuation allowance must be established which reduces the amount of deferred tax assets recorded
on the consolidated balance sheets. To the extent the Company establishes a valuation allowance or increase or decrease this allowance
in a period, the impact will be included in income tax expense in the consolidated statement of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>  </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for income taxes under
the provisions of Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”)
740, “Income Taxes”, or ASC 740. As of December 31, 2017, and 2016, there were no unrecognized tax benefits included
in the consolidated balance sheets that would, if recognized, affect the effective tax rate. The Company’s practice is to
recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest
or penalties in its consolidated balance sheets at December 31, 2017 and 2016, and has not recognized interest and/or penalties
in the consolidated statements of operations for the years ended December 31, 2017 and 2016. The Company is subject to taxation
in the United States, California and New Jersey. The Company’s tax years since 2000 may be subject to examination by the
federal and state tax authorities due to the carryforward of unutilized net operating losses.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Cash and Cash Equivalents</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cash equivalents include short-term, highly
liquid investments with maturities of three months or less at the time of acquisition.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Concentrations of Credit Risk</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company places its cash with financial
institutions deemed by management to be of high credit quality. The Federal Deposit Insurance Corporation (“FDIC”)
provides basic deposit coverage with limits up to $250 per owner. At December 31, 2017, the Company had approximately $3,969 in
cash deposits in excess of FDIC limits.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Accounts Receivable</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts receivable are stated net of allowances
for doubtful accounts and contractual adjustments. The accounts receivable balance primarily includes amounts due from customers
the Company has invoiced or from third-party providers (e.g., insurance companies and governmental agencies), but for which payment
has not been received. Charges to bad debt are based on both historical write-offs and specifically identified receivables. Contractual
adjustments are determined by the amount expected to be collected from third-party providers. Accounts receivable are presented
net of allowances for doubtful accounts and contractual adjustments in the amount of $275 and $422 as of December 31, 2017 and
2016, respectively.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Inventories</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories are stated at the lower of cost
or market. Cost is determined on a first-in, first-out basis. The Company evaluates the carrying value of inventories on a regular
basis, based on the price expected to be obtained for products in their respective markets compared with historical cost. Write-downs
of inventories are considered to be permanent reductions in the cost basis of inventories.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company also regularly evaluates its inventories
for excess quantities and obsolescence (expiration), taking into account such factors as historical and anticipated future sales
or use in production compared to quantities on hand and the remaining shelf life of products and active pharmaceutical ingredients
on hand. The Company establishes reserves for excess and obsolete inventories as required based on its analyses.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Investment in Eton Pharmaceuticals, Inc. </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2017, the Company formed Eton Pharmaceuticals,
Inc. (“Eton”) as a wholly owned subsidiary. In June 2017, Eton entered into and closed on definitive stock purchase
agreements with accredited investors for the purchase of Eton’s Series A Preferred Stock that resulted in net proceeds to
Eton, after deducting placement agent fees and other expenses, of approximately $18,000. At the time of closing, the Company lost
voting and ownership control of Eton and it ceased consolidating Eton’s financial statements. At the time of deconsolidation,
the Company recorded a gain of $5,725 and adjusted the carrying value in Eton to reflect the increased valuation of Eton and the
Company’s new ownership percent in accordance with ASC 810-10-40-4(c), <i>Consolidation</i>.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company owns 3,500,000 common shares (approximately
27% issued and outstanding equity interest as of December 31, 2017) of Eton and, uses the equity method of accounting for this
investment, as management has determined that the Company has the ability to exercise significant influence over the operating
and financial decisions of Eton. Under this method, the Company recognizes earnings and losses of Eton in its financial statements
and adjusts the carrying amount of its investment in Eton accordingly. The Company’s share of earnings and losses are based
on the shares of common stock and in-substance common stock of Eton held by the Company. Any intra-entity profits and losses are
eliminated. During the year ended December 31, 2017, the Company recorded equity in net loss of Eton of $2,218. As of December
31, 2017, the carrying value of the Company’s investment in Eton was $3,507.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Property, Plant and Equipment</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property, plant and equipment is stated at
cost less accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-line method
over the estimated useful life of the asset. Leasehold improvements and capital lease equipment are amortized over the estimated
useful life or remaining lease term, whichever is shorter. Computer software and hardware and furniture and equipment are depreciated
over three to five years.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Business Combinations</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for business combinations
by recognizing the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair
values on the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions,
especially with respect to intangible assets, estimated contingent consideration payments and pre-acquisition contingencies. Examples
of critical estimates in valuing certain of the intangible assets the Company has acquired or may acquire in the future include
but are not limited to:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 24px"> </td>
<td style="width: 24px"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">future expected cash flows from product sales, support agreements, consulting contracts, other customer contracts, and acquired developed technologies and patents; and</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">discount rates utilized in valuation estimates.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Unanticipated events and circumstances may
occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Additionally, any change in the
fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes from events
after the acquisition date, such as changes in our estimates of relevant revenue or other targets, will be recognized in earnings
in the period of the estimated fair value change. A change in fair value of the acquisition-related contingent consideration or
the occurrence of events that cause results to differ from our estimates or assumptions could have a material effect on the consolidated
financial position, statements of operations or cash flows in the period of the change in the estimate.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Goodwill and Intangible Assets</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Patents and trademarks are recorded at cost
and capitalized at a time when the future economic benefits of such patents and trademarks become more certain. At that time, the
Company capitalizes third-party legal costs and filing fees associated with obtaining and prosecuting claims related to its patents
and trademarks. Once the patents have been issued, the Company amortizes these costs over the shorter of the legal life of the
patent or its estimated economic life, generally 20 years, using the straight-line method. Trademarks are an indefinite life intangible
asset and are assessed for impairment based on future projected cash flows as further described below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company reviews its goodwill and indefinite-lived
intangible assets for impairment as of January 1 of each year and when an event or a change in circumstances indicates the fair
value of a reporting unit may be below its carrying amount. Events or changes in circumstances considered as impairment indicators
include but are not limited to the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 24px"> </td>
<td style="width: 24px"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">significant underperformance of the Company’s business relative to expected operating results;</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">significant adverse economic and industry trends;</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">significant decline in the Company’s market capitalization for an extended period of time relative to net book value; and</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">expectations that a reporting unit will be sold or otherwise disposed.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The goodwill impairment test consists of a
two-step process as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Step 1. The Company compares the fair value
of each reporting unit to its carrying amount, including the existing goodwill. The fair value of each reporting unit is determined
using a discounted cash flow valuation analysis. The carrying amount of each reporting unit is determined by specifically identifying
and allocating the assets and liabilities to each reporting unit based on headcount, relative revenues or other methods as deemed
appropriate by management. If the carrying amount of a reporting unit exceeds its fair value, an indication exists that the reporting
unit’s goodwill may be impaired and the Company then performs the second step of the impairment test. If the fair value of
a reporting unit exceeds its carrying amount, no further analysis is required.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Step 2. If further analysis is required, the
Company compares the implied fair value of the reporting unit’s goodwill, determined by allocating the reporting unit’s
fair value to all of its assets and its liabilities in a manner similar to a purchase price allocation, to its carrying amount.
If the carrying amount of the reporting unit’s goodwill exceeds its fair value, an impairment loss will be recognized in
an amount equal to the excess.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Impairment of Long-Lived Assets</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Long-lived assets, such as property, plant
and equipment, purchased intangibles subject to amortization and patents and trademarks, are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected
to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge
is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed
of would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value
less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would
be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In September 2016, the Company decided to
cease operations at its Texas facility, and began winding down the operations. Based on current projections regarding future cash
flows of the Texas facility and the related subsidiary, the evaluation resulted in an impairment of $64 related to intangible
assets and $239 related to goodwill, recorded to impairment of long-lived assets on the consolidated statements of operations
during the year ended December 31, 2016. During the year ended December 31, 2017, the Company did not recognize any impairment
of its long-lived assets (See Note 7).</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Third Party Billing and Collection Agreements
</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with its acquisition of Park,
the Company entered into a billing and collection agreement with a third party to assist in the billing and collection of workers’
compensation claims. Under the terms of the agreement, the Company is obligated to pay a fixed fee to the third party equal to
55% of the amounts billed and collected under the workers’ compensation claims. The Company accrues for such fees in accounts
payable and accrued expenses in the accompanying consolidated balance sheets. Total billing and collection management expense
under this agreement for the years ended December 31, 2017 and 2016 was $0 and $55, respectively, and is included in selling and
marketing expenses in the accompanying consolidated statements of operations. The amount due under the agreement as of December
31, 2017 and 2016 was $41 and $73, respectively.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Deferred Rent </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for rent expense related
to its operating leases by determining total minimum rent payments on the leases over their respective periods and recognizing
the rent expense on a straight-line basis. The difference between the actual amount paid and the amount recorded as rent expense
in each fiscal year and interim periods within each fiscal year is recorded as an adjustment to deferred rent (see Note 10).</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Fair Value Measurements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Fair value measurements are determined based
on the assumptions that market participants would use in pricing an asset or liability. GAAP establishes a hierarchy for inputs
used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring
that the most observable inputs be used when available. The established fair value hierarchy prioritizes the use of inputs used
in valuation methodologies into the following three levels:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 24px; text-align: justify"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Level 1: Applies to assets or liabilities for which there are quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.</font></td></tr>
<tr style="vertical-align: top">
<td style="text-align: justify"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Level 2: Applies to assets or liabilities for which there are significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.</font></td></tr>
<tr style="vertical-align: top">
<td style="text-align: justify"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Level 3: Applies to assets or liabilities for which there are significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. For example, Level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2017 and 2016, the Company
did not have any financial assets or liabilities that are measured on a recurring basis. The Company’s financial instruments
included cash and cash equivalents, restricted short-term investments, accounts receivable, accounts payable and accrued expenses,
accrued payroll and related liabilities, deferred revenue and customer deposits, deferred acquisition obligations, notes payable
and capital leases. The carrying amount of these financial instruments, except for deferred acquisition obligations, notes payable
and capital leases, approximates fair value due to the short-term maturities of these instruments. The Company’s restricted
short-term investments are carried at amortized cost, which approximates fair value. Based on borrowing rates currently available
to the Company, the carrying values of the deferred acquisition obligations, notes payable and capital leases, approximate their
respective fair values.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Derivative Instruments</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for free-standing derivative
instruments and hybrid instruments that contain embedded derivative features as either assets or liabilities in the consolidated
balance sheets and are measured at fair value with gains or losses recognized in earnings. Embedded derivatives that are not clearly
and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized
as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based
on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each
instrument.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company estimates the fair value of derivative
instruments and hybrid instruments using various techniques (and combinations thereof) that are considered to be consistent with
the objective of measuring fair value. In selecting the appropriate technique, the Company considers, among other factors, the
nature of the instrument, the market risks that it embodies and the expected means of settlement. The Company generally uses the
Black-Scholes-Merton option pricing model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions
(including trading volatility, estimated terms, dilution and risk-free rates) necessary to fair value these instruments. Estimating
the fair value of derivative financial instruments requires the development of significant and subjective estimates that may,
and are likely to, change over the duration of the instrument with related changes in internal and external market factors. Increases
in the trading price of the Company’s common stock and increases in fair value during a given financial quarter result in
the application of non-cash derivative expense. Conversely, decreases in the trading price of the Company’s common stock
and decreases in fair value during a given financial quarter would result in the application of non-cash derivative income.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Stock-Based Compensation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">All stock-based payments to employees, directors
and consultants, including grants of stock options, warrants, restricted stock units (“RSUs”) and restricted stock,
are recognized in the consolidated financial statements based upon their estimated fair values. The Company uses the Black-Scholes-Merton
option pricing model and Monte Carlo Simulation to estimate the fair value of stock-based awards. The estimated fair value is determined
at the date of grant. The financial statement effect of forfeitures is estimated at the time of grant and revised, if necessary,
if the actual effect differs from those estimates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s accounting policy for
equity instruments issued to consultants and vendors in exchange for goods and services follows FASB guidance. As such, the value
of the applicable stock-based compensation is periodically remeasured and income or expense is recognized during the vesting terms
of the equity instruments. The measurement date for the estimated fair value of the equity instruments issued is the earlier of
(i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant
or vendor’s performance is complete. In the case of equity instruments issued to consultants, the estimated fair value of
the equity instrument is primarily recognized over the term of the consulting agreement. According to FASB guidance, an asset
acquired in exchange for the issuance of fully vested, nonforfeitable equity instruments should not be presented or classified
as an offset to equity on the grantor’s balance sheet once the equity instrument is granted for accounting purposes. Accordingly,
the Company records the estimated fair value of nonforfeitable equity instruments issued for future consulting services as prepaid
stock-based consulting expenses in its consolidated balance sheets.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Basic and Diluted Net Loss per Common Share</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic net loss per common share is computed
by dividing net loss attributable to common stockholders for the period by the weighted average number of common shares outstanding
during the period. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders for the
period by the weighted average number of common and common equivalent shares, such as stock options and warrants, outstanding during
the period.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic and diluted net loss per share is computed
using the weighted average number of shares of common stock outstanding during the period. Common stock equivalents (using the
treasury stock and “if converted” method) from deferred acquisition obligations, stock options, unvested RSUs, warrants
and convertible notes were 9,980,454 and 9,162,259 at December 31, 2017 and 2016, respectively, and are excluded from the calculation
of diluted net loss per share for all periods presented because the effect is anti-dilutive. Included in the basic and diluted
net loss per share calculation were RSUs awarded to directors that had vested, but the issuance and delivery of the shares are
deferred until the director resigns. The number of shares underlying these vested RSUs at December 31, 2017 and 2016 was 137,067
and 80,245, respectively,</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows the computation of
basic and diluted net loss per share of common stock for the years ended December 31, 2017 and 2016:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">For the </font><br />
<font style="font-size: 10pt">Year Ended December 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">For the </font><br />
<font style="font-size: 10pt">Year Ended December 30, 2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; padding-bottom: 2.5pt"><font style="font-size: 10pt">Numerator – net loss</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(11,985</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(19,087</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Denominator – weighted average</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">number of shares outstanding, basic and diluted</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">20,027,712</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">12,743,184</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Net loss per share, basic and diluted</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(0.60</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(1.50</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b></b></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Recently Adopted Accounting Pronouncements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In March 2016, the FASB issued Accounting Standards
Update (“ASU”) 2016-09, <i>Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment
Accounting</i>, which addresses certain aspects of accounting for share-based payment award transactions. The Company adopted this
standard on January 1, 2017. The adoption did not have a material impact on the Company’s financial position, results of
operations and cash flows. Prior periods were not recast.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2015, the FASB issued ASU 2015-11,
<i>Simplifying the Measurement of Inventory, </i>which requires entities to measure most inventory “at the lower of cost
and net realizable value (“NRV”),” thereby simplifying the current guidance under which an entity must measure
inventory at the lower of cost or market. Under the new guidance, inventory is “measured at the lower of cost and net realizable
value,” which eliminates the need to determine replacement cost and evaluate whether it is above the ceiling (NRV) or below
the floor (NRV less a normal profit margin). The guidance defines NRV as the “estimated selling prices in the ordinary course
of business, less reasonably predictable costs of completion, disposal, and transportation.” The Company adopted this standard
on January 1, 2017. The adoption did not have a material impact on the Company’s financial position, results of operations
and cash flows. Prior periods were not recast.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Recently Issued Accounting Pronouncements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2014, the FASB issued ASU 2014-09, <i>Revenue
from Contracts with Customers </i>and has subsequently issued a number of amendments to ASU 2014-09<i>.</i> This updated guidance
supersedes the current revenue recognition guidance, including industry-specific guidance. The updated guidance introduces a five-step
model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers
at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. To achieve this core principle, ASU 2014-09 includes provisions within its five-step model that includes
identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction
price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies
a performance obligation. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue
and cash flows arising from contracts with customers.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The new standard will be effective for the
Company beginning January 1, 2018 and permits two methods of adoption: the full retrospective method, which requires the standard
to be applied to each prior period presented, or the modified retrospective method, which requires the cumulative effect of adoption
to be recognized as an adjustment to opening retained earnings in the period of adoption. The Company will adopt the standard using
the modified retrospective method.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has completed an analysis of existing
contracts with its customers and assessed the differences in accounting for such contracts under ASU 2014-09 compared with current
revenue accounting standards. Based on its review of current customer contracts, the Company does not expect the implementation
of ASU 2014-09 to have a material quantitative impact on its consolidated financial statements as the timing of revenue recognition
for product sales is not expected to significantly change. In limited instances, the Company may recognize revenue earlier than
under the current standard. Under certain licensing arrangements that the Company has considered, there may be times the Company
may defer certain revenue where the price pursuant to the underlying customer arrangement is not fixed and determinable. Under
the new standard, such customer arrangements will be accounted for as variable consideration, which may result in revenue being
recognized earlier provided the Company can reliably estimate the ultimate price expected to be realized from the customer. In
addition, the Company does not expect a material effect for any adjustments to retained earnings upon adoption of the standard
on January 1, 2018. Adoption of the new standard will also result in additional revenue-related disclosures in the footnotes to
the Company’s consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2016, the FASB issued ASU 2016-01,
<i>Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities</i>, which addresses certain
aspects of recognition, measurement, presentation and disclosure of financial statements. This guidance will be effective in the
first quarter of fiscal year 2019 and early adoption is not permitted. The Company is currently evaluating the impact that this
guidance will have on its consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2016, the FASB issued new lease
accounting guidance in ASU No. 2016-02, <i>Leases</i> (Topic 842). This new guidance was initiated as a joint project with the
International Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of financial
information for users. This new guidance would eliminate the concept of off-balance sheet treatment for “operating leases”
for lessees for the vast majority of lease contracts. Under ASU No. 2016-02, at inception, a lessee must classify all leases with
a term of over one year as either finance or operating, with both classifications resulting in the recognition of a defined “right-of-use”
asset and a lease liability on the balance sheet. However, recognition in the income statement will differ depending on the lease
classification, with finance leases recognizing the amortization of the right-of-use asset separate from the interest on the lease
liability and operating leases recognizing a single total lease expense. Lessor accounting under ASU No. 2016-02 would be substantially
unchanged from the previous lease requirements under GAAP. ASU No. 2016-02 will take effect for public companies in fiscal years
beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted and for leases
existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, lessees
and lessors must apply a modified retrospective transition approach. During the year ended December 31, 2017, the Company evaluated
this new accounting standard and engaged professionals in the new lease accounting implementation to assist in determining the
effect of the new standard as of January 1, 2018 with respect to the Company’s real estate leases. The Company currently
has three real estate leases and evaluated each of these leases in accordance with the new lease accounting standard under ASC
Topic 842. As of January 1, 2018, the Company estimates that the right of use asset to be recorded on its consolidated balance
sheet would be approximately $2,400 and that the related lease liability would be approximately $3,000 related to operating leases.
The difference between the right of use asset and related lease liability is predominantly deferred rent and other related lease
expenses under the new lease accounting standard. The Company will continue this effort with respect to equipment leases and any
other leases contemplated under Topic 842 in a manner to be appropriately prepared for its implementation on or before January
1, 2019.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2016, the FASB issued ASU 2016-18,
<i>Statement of Cash Flows: Classification Restricted Cash</i>, which requires that a statement of cash flows explain the change
during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash
equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with
cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash
flows. ASU 2016-18 is effective for reporting periods beginning after December 15, 2017 with early adoption permitted. The Company
expects the implementation of this standard to have an impact on the Company’s consolidated financial statements and related
disclosures as the Company had restricted cash on our balance sheet of $200 as of December 31, 2017, and currently do not present
the amount as a cash equivalent in our consolidated statements of cash flows.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2017, the FASB issued ASU 2017-01,
<i>Business Combinations, Clarifying the Definition of a Business,</i> which revises the definition of a business and provides
new guidance in evaluating when a set of transferred assets and activities is a business. ASU 2017-01 is effective for reporting
periods beginning after December 15, 2017 with early adoption permitted. The Company does not expect the ASU 2017-01 to have a
material impact on the Company’s financial position, results of operations and cash flows.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2017, the FASB issued ASU 2017-04,
<i>Intangibles-Goodwill and Other</i>. This guidance simplifies the accounting for goodwill impairment for all entities by requiring
impairment charges to be based on the first step in the current two-step impairment test under ASC 350. The updated standard eliminates
the requirement to calculate a goodwill impairment charge using Step 2. If a reporting unit’s carrying amount exceeds its
fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount
of goodwill allocated to that reporting unit. ASU 2017-04 is effective for reporting periods beginning after December 31, 2019
on a prospective basis, and early adoption is permitted. The Company does not expect ASU 2017-04 to have a material effect on the
Company’s financial position, results of operations and cash flows.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2017, the FASB issued ASU 2017-09,
<i>Compensation - Stock Compensation: Scope of Modification Accounting</i>. The amendments in this update provide guidance about
which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting under
Topic 718. An entity should account for effects of a modification unless all of the following are met: (1) the fair value of the
modified award is the same as the fair value of the original award immediately before the original award is modified; (2) the
vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original
award is modified; (3) the classification of the modified award as an equity instrument or a liability instrument is the same
as the classification of the original award immediately before the original award is modified. The amendments in this update are
effective for all entities for annual periods and interim periods within those annual periods, beginning after December 15, 2017,
which for the Company means January 1, 2018. Early adoption is permitted, including adoption in any interim period for public
business entities for reporting periods for which financial statements have not yet been issued. The Company does not expect the
adoption of ASU 2017-09 to have a material effect on the Company’s financial position, results of operations and cash flows.</p>
108000
3000
135000
7100
7200
8059000
62899000
354000
2026
59215000
2017
305000
-0.6297
0.0000
0.35
0.21
40000
0.3500
0.3500
-0.0100
-0.0100
0.0160
0.0008
0.0000
0.0000
0.0084
-0.0147
-0.0239
0.0000
0.0000
0.0000
0.0304
-0.0018
0.3482
-0.3189
0.0726
0.0054
-985000