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<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 7. SUBSEQUENT EVENTS</b></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">The Company has performed an evaluation of
events occurring subsequent to September 30, 2013 through the filing date of this Quarterly Report. Based on our evaluation, nothing
other than the events described below need to be disclosed.</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">Effective October 1, 2013, Paul Finnegan resigned
from the Board of Directors of the Company. All 6,865 RSUs granted to Mr. Finnegan in June 2013 terminated unvested.</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">Effective October 2, 2013, the Board of Directors
of the Company elected Peter Kenny to the Company’s Board of Directors. Mr. Kenny was granted 8,947 RSUs under the Plan.
The RSUs vest in full on the 13 month anniversary of the date of grant and have certain deferral features under Section 409A of
the Internal Revenue Code.</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 October 2013, the Company granted options
to purchase 10,300 shares of the Company’s common stock under the Plan to a consultant with an exercise price of $4.51 which
was equal to the current market price of the Company’s common stock on the grant date. The options have a 5-year term and
vest over one year on a quarterly basis, and were granted as consideration for the provision of certain services.</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">On October 8, 2013, the Company acquired intellectual
property rights related to certain proprietary innovations from the pharmacy research and development operations of Novel Drug
Solutions, LLC (“Novel”) pursuant to an asset purchase agreement (the “Novel APA”). In connection with
the acquisition, the Company was assigned a provisional patent application related to the use of epinephrine compositions for
intraocular administration. This is the Company’s second asset acquisition from Novel.</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 consideration for the acquisition, the
Company is obligated to make the following payments to Novel: (1) one 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) one payment payable within 30
days after the Company files the first IND with the FDA for the first product arising from the acquired intellectual property
(if any); (3) one payment payable within 30 days after the Company files the first New Drug application with the FDA for the first
product; 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 of the date of the Novel APA the Company either has not
filed an IND or has failed to generate royalty payments to Novel for any product based on the acquired intellectual property,
Novel may terminate the Novel APA and request that the Company re-assign the acquired technology to Novel.</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">On October 22, 2013, the Company entered into
an Amendment to the Novel APA (the “Novel Amendment”), which amends the Novel APA to expand the acquired assets to
include compositions comprising one or more of epinephrine, Shugarcaine, phenylephrine, or lidocaine, in each case for use in
the prevention or treatment of any disease, state or condition in humans. In connection with the Novel Amendment, the Company
was assigned a provisional patent application related to pharmaceutical compositions, including those for ophthalmological applications,
comprising epinephrine-based compounds, and to methods of preparing and using such compositions.</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">On October 14, 2013, the Company entered into
an amendment to the ECN APA (the “ECN Amendment”) with the Sellers, which amends the ECN APA. The ECN Amendment revises
the circumstances under which the Sellers may terminate the ECN APA to provide that if following five years of the date of the
ECN APA the Company has not initiated any study where data is derived or has failed to generate royalty payments to the Sellers
for any product based on the acquired intellectual property, the Sellers may jointly terminate the ECN APA and request that the
Company re-assign the acquired technology to the Sellers. The ECN Amendment provides the Company with the ability to utilize a
wider range of commercialization strategies with respect to the acquired technology.</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">On October 21, 2013, the Company entered into
an Amendment to Asset Purchase Agreement (the “Buderer Amendment”) with Buderer, which amends the Buderer APA. The
Buderer Amendment amends the circumstances under which Buderer may terminate the Buderer APA to provide that if following five
years of the date of the Buderer APA, the Company has not initiated any study where data is derived or has failed to generate
royalty payments to Buderer for any product based on the acquired intellectual property, Buderer may terminate the Buderer APA
and request that the Company re-assign the acquired technology to Buderer. The Buderer Amendment provides the Company with the
ability to utilize a wider range of commercialization strategies with respect to the acquired technology.</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">On November 1, 2013, the Company discontinued
the Company’s previously planned Phase 3 clinical trial for Impracor. The Company expects to consider alternative clinical
development and commercialization options for Impracor. These alternatives could include reformulating Impracor and utilizing
distribution channels outside of the Section 505(b)(2) pathway, including licensing Impracor to compounding pharmacies or other
healthcare facilities and targeting specific patient groups.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>NOTE 6. COMMITMENTS AND CONTINGENCIES</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>Commitments</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2013, the Company entered into
a lease agreement for 3,874 square feet of office space from May 1, 2013 to September 30, 2016, effective May 1, 2013. Monthly
rent began on May 1, 2013 in the amount of $10,406, 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 five months at various times during the lease agreement. The total lease obligation
is approximately $387,900. For the remaining fiscal year 2013, the Company’s lease commitment is approximately $31,200.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company previously leased an office
facility under a noncancelable operating lease, which had an expiry date of February 28, 2014, with $3,715 due monthly until expiration.
In August 2013, the Company made a one-time payment of $7,000 as consideration to terminate this lease prior to its expiration
date and as a result no future amounts are due under this lease.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>Indemnities and Guarantees</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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
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 lessor
in connection with its facility lease for certain claims arising from the use of the facility. These guarantees and 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 been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded
for these indemnities and guarantees in the accompanying condensed consolidated balance sheets.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>PCCA License Agreement </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Professional Compounding Centers of
America, or PCCA, has granted to the Company and its affiliates certain exclusive rights under PCCA’s proprietary formulations,
other technologies and data, and the Company has agreed to pay to PCCA certain royalties on net sales relating to the sale of certain
future products, which royalties range from 4.5% to 9% for each product, subject to certain minimum royalty payments. PCCA may
terminate the PCCA License Agreement if the Company fails to commence efforts to research and develop future products within certain
time periods, as set forth in the PCCA License Agreement.</p>
<p style="font: 10pt/normal 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"><b>PCCA Strategic Alliance Agreement </b></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">On February 18, 2013, we entered into a Strategic
Alliance Agreement (the “Agreement”) with PCCA. Under the Agreement, PCCA has agreed that during the term of the Agreement,
it will not introduce any of PCCA’s members or customers meeting certain criteria (the “Member/Customers”) to
any third party whereby such third party licenses or otherwise acquires the intellectual property rights of such Member/Customer,
without first presenting such an opportunity to the Company. PCCA may, but is not required to, present such opportunities to the
Company, use reasonable efforts to facilitate an introductory meeting between the Member/Customer and the Company, and to further
provide certain key technical assistance to a potential development project associated with the Member/Customer’s intellectual
property rights. In the event the Company and a Member/Customer introduced to the Company by PCCA enter into a commercial agreement
for the license or acquisition of the intellectual property rights owned by the Member/Customer, PCCA will be entitled to receive
certain cash fees up to an aggregate of $100,000, as well as a commission based on net sales, if any, generated by the Company
as a result of the acquired intellectual property rights. The Agreement has a term of one year and is automatically extended for
successive one year periods unless either party gives the other written notice of non-renewal.</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"><b>Buderer Asset Purchase Agreement </b></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">On June 11, 2013, the Company acquired intellectual
property rights related to certain proprietary innovations from the compounding pharmacy operations of Buderer Drug Company, Inc.
(“Buderer”) pursuant to an Asset Purchase Agreement (the “Buderer APA”). In addition, the Company has a
right of first refusal on additional Buderer intellectual property and drug development opportunities. The Buderer APA provides
that Buderer 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.</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 consideration for the acquisition of the
intellectual property rights, the Company is obligated to make the following payments to Buderer: (1) one 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)
one 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); and (3) 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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Novel Drug and Eye Care Northwest Asset
Purchase Agreement </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On August 8, 2013, the Company acquired intellectual
property rights related to certain proprietary innovations from the compounding pharmacy operations of Novel Drug Solutions, LLC
and from Eye Care Northwest, Inc. (together referred to as the “Sellers”) pursuant to an Asset Purchase Agreement (the
“ECN APA”). As part of this acquisition the Company has acquired intellectual property assets, including a provisional
patent application related to injectable ophthalmological compositions having anti-bacterial and anti-inflammatory properties for
the prevention of post-ophthalmic surgery complications. In addition, under the ECN APA, the Company has a right of first refusal
on any of the Sellers’ additional intellectual property and drug development opportunities. The ECN APA provides that the
Sellers will cooperate with us in obtaining patent protection for the acquired intellectual property, among other things, and that
we will use commercially reasonable efforts to research, develop and commercialize a product based on the acquired intellectual
property.</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 consideration for the acquisition, the
Company is obligated to make the following payments to the Sellers: (1) one 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) one payment payable within
30 days after we file the first IND with the FDA for the first product arising from the acquired intellectual property (if any);
(3) one payment payable within 30 days after we file the first New Drug application with the FDA for the first product; and (4)
certain royalty payments based on the net receipts received by us in connection with the sale or licensing of any product based
on the acquired intellectual property (if any), after deducting (among other things) our development costs associated with such
product.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 5. STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </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; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the Public Offering, after
the effectiveness of the Registration Statement on February 7, 2013, the Company effected a one-for-five reverse stock split of
its common stock and on February 8, 2013, the Company’s common stock began trading on The NASDAQ Capital Market on a split-adjusted
basis. All information included in this Quarterly Report has been adjusted to reflect the effect of the one-for-five reverse stock
split.</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 February 2013, the Company issued 219 shares
of common stock at a price of $4.00 per share. The shares of common stock were issued to net settle total common stock options
to purchase 1,030 shares of common stock pursuant to a cashless exercise provision.</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">During February and March 2013, the Company
made payments totaling $191 in connection with cancelled, fractional share amounts of common stock (35 common stock share equivalents)
in connection with the reverse stock split effected February 7, 2013.</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">On February 13, 2013, the Company closed the
underwritten Public Offering of 1,840,000 shares of its common stock at a per share price to the public of $5.25, and received
net proceeds of $8,140,435 after deducting underwriter fees and commissions and other offering expenses. The underwriters also
exercised their option to purchase an additional 276,000 shares of common stock from the Company at $5.25 per share to cover over-allotments
on March 14, 2013. Net cash proceeds from the exercise of the over-allotment option were $1,316,116. On February 7, 2013, the Company
entered into an Underwriting Agreement (the “Underwriting Agreement”) with MDB Capital Group, LLC. As contemplated
by the Underwriting Agreement, at the closing of the Public Offering and the over-allotment exercise, the underwriters received
warrants (the “Underwriter Warrants”) to purchase an aggregate of 179,860 shares, or 8.5% of the number of shares sold
in the offering (including 8.5% of shares sold pursuant to their over-allotment option). The Underwriter Warrants are exercisable
at $5.25 per share (100% of the price of the common stock sold in the offering), commencing on the effective date of the offering
and expiring five years from the effective date of the offering.</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">During June 2013, the Company issued 40,000
shares of common stock to Mark Baum, the Company’s CEO and a director, related to vesting of RSUs.</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">During the nine months ended September 30,
2013, the Company issued 40,000 restricted shares of common stock to Dr. Robert Kammer, a director, valued at $282,997, in consideration
for consulting services provided during the year ended December 31, 2012 and through September 30, 2013.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">During September 2013, the Company issued
2,114 restricted shares of common stock to a consultant, valued at $10,750, in consideration for consulting services provided during
the nine months ended September 30, 2013. The fair value of the shares of common stock issued was recorded as stock-based compensation
during the nine months ended September 30, 2013.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Preferred Stock</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">At September 30, 2013, 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/normal Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>Stock Option Plan </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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 “Plan”).
As of September 30, 2013, the Plan provides for the issuance of a maximum of an aggregate of 5,000,000 shares of the Company’s
common stock. The purpose of the Plan is to provide an incentive 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 and restricted stock.
The Plan is administered by the Compensation Committee of the Company’s Board of Directors.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of the Plan activity with
respect to options to purchase common stock for the nine months ended September 30, 2013 is as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Number of shares</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Avg.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise Price</p></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Avg.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Remaining</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Contractual Life</p></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Aggregate</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Intrinsic Value</p></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 40%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options outstanding - January 1, 2013</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">905,806</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.26</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 12%; text-align: right; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 12%; text-align: right; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">569,653</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">6.93</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options exercised</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">(1,030</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">)</font></td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">4.00</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options cancelled/forfeit</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">(220,975</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">)</font></td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">8.72</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options outstanding - September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">1,253,454</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.41</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.77</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">651,435</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options exercisable</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">817,906</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4.39</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4.43</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">613,752</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options vested and expected to vest</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">1,209,899</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.34</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.68</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">647,667</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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 September 30, 2013, based on the closing price of the Company’s common stock of $4.50 on that date.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2013, the Company granted options
to employees of the Company to acquire an aggregate of 120,000 shares of the Company’s common stock under the Plan, each
with an exercise price of $6.00, the current market price of the Company’s common stock on the grant date. The options each
have 10-year terms and vest quarterly over three years.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2013, the Company granted options
to an employee of the Company to acquire 51,675 shares of the Company’s common stock under the Plan. The options have an
exercise price of $9.00, the current market price of the Company’s common stock on the grant date, a 10-year term and vest
over a three year period, such that 33% of the options vest on the first anniversary of the grant date and the remaining 67% of
the options vest quarterly in equal installments thereafter over two years.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2013, the Company granted options
to Mark Baum, its CEO, to acquire 180,000 shares of the Company’s common stock under the Plan, in accordance with the terms
of the Company’s amended and restated employment agreement with Mr. Baum. The options have an exercise price of $8.99, the
current market price of the Company’s common stock on the grant date, a 10-year term and vest quarterly over three years.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2013, the Company granted options
to an employee of the Company to acquire 25,000 shares of the Company’s common stock under the Plan. The options have an
exercise price of $7.02, the current market price of the Company’s common stock on the grant date, a 10-year term and vest
over a 30 month period, such that 6,250 shares vest on the first anniversary of the grant date and the remaining 75% of the options
vest in three equal semi-annual installments thereafter.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below illustrates the fair
value per share determined by the Black-Scholes-Merton option pricing model with the following assumptions used for valuing options
granted to employees:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Nine months ended</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>September 30, 2013</b></p></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Weighted-average fair value of options granted</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 20%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">6.82</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected terms (in years)</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">5.8</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected volatility</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"> <font style="color: black">104%-123</font></font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Risk-free interest rate</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"> <font style="color: black">0.86 %-1.69</font></font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Dividend yield</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Effective April 1, 2012, the Company
entered into an advisory agreement with director Dr. Robert J. Kammer (the “Advisory Agreement”) pursuant to which
Dr. Kammer provided certain services to the Company in addition to his services as a director, including, but not limited to, providing
management and advice regarding the operations of the Company’s clinical trials and assistance in the identification of new
drug delivery technologies. As part of Dr. Kammer’s compensation under the Advisory Agreement, the Company granted to Dr.
Kammer on April 1, 2012 an option to purchase up to 60,000 shares of the Company’s common stock at an exercise price of $4.50
per share under the Plan. The option terminates on March 31, 2017 and vests over a two year period, with 15,000 options vesting
immediately upon issuance and an additional 1,875 options vesting monthly for the next twenty four months thereafter. In accordance
with accounting guidance for stock-based compensation to consultants, the unvested portion of the option was remeasured on an interim
basis until the termination of the Advisory Agreement. On September 30, 2013, the Advisory Agreement was terminated, and the remaining
unvested options (totaling 13,125) were cancelled.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 13, 2013, the Company entered
into a statement of work agreement with a clinical development consultant (the “SOW Agreement”). In partial consideration
for the services provided under the SOW Agreement, the Company issued an option to purchase up to 11,428 shares of the Company’s
common stock at an exercise price of $8.75 per share. The option will terminate on January 13, 2017 and vests over an eighteen
month period, with approximately 635 options vesting monthly for eighteen months beginning in February 2013. The remeasured fair
value of the unvested portion of the stock option as of September 30, 2013, based on the Black-Scholes-Merton option pricing model,
was $10,974.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2013, the Company granted an
option to purchase 25,000 shares of the Company’s common stock to a consultant with an exercise price of $8.90 which was
equal to the current market price of the Company’s common stock on the grant date. The options have a 3-year term and vested
in full in August 2013, following completion of certain services.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2013, Dr. Balbir Brar resigned
as President, but concurrent with his resignation entered into a senior advisory consultant agreement and modification to his option
agreement that allowed for his options related to his service to the Company as President to continue vesting as long as he continued
service to the Company as a consultant. The unvested portion of the options prior to his resignation (totaling 131,250) were treated
as cancelled as of the date of the modification and subsequently re-issued. On September 26, 2013, the Company and Dr. Brar mutually
agreed to terminate his consulting agreement, and upon termination, the Company accelerated vesting of 50,000 options and cancelled
the remaining 50,000 unvested options.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2013, the Company granted an
option to purchase 10,000 shares of the Company’s common stock to a consultant in consideration for the performance of certain
services. The options have an exercise price of $7.69 per share, equal to the closing price of the Company’s common stock
on the grant date. The options have a four year term and vest in full in July 2014. As of September 30, 2013, the remeasured fair
value of the stock option, based on the Black-Scholes-Merton option pricing model, was $21,366. The amount of unamortized stock-based
compensation that has not been expensed related to the unvested option grant is $17,109.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2013, the Company granted an
option to purchase 5,000 shares of the Company’s common stock to a consultant in consideration for the performance of certain
services. The options have an exercise price of $8.06 per share, which was equal to the closing price of the Company’s common
stock on the grant date. The options have a three year term and vested in equal monthly installments over the next three months.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In September 2013, the Company granted
an option to purchase 10,300 shares of the Company’s common stock to a consultant in consideration for the performance of
certain services. The options have an exercise price of $4.50 per share, which was equal to the closing price of the Company’s
common stock on the grant date, a five year term and vest over one year on a quarterly basis. As of September 30, 2013, the remeasured
fair value of the stock option, based on the Black-Scholes-Merton option pricing model, and the unamortized stock-based compensation
that has not been expensed related to the grant is $34,882.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As of September 30, 2013, there was
approximately $1,742,000 of total unrecognized compensation expense related to unvested stock options under the Plan. That is expected
to be recognized over the weighted-average remaining vesting period of 2.09 years.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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. Prior to April 1, 2013, expected volatilities
were based on historical volatility of the Company’s common stock and other factors. Following April 1, 2013, the expected
volatility is based on the historical volatilities of the common stock of comparable publicly traded companies based on the Company’s
belief the it has significantly changed its business operations and focus, and as a result, 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, affecting 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/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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 options
granted to consultants:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Nine months ended</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>September 30, 2013</b></p></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Weighted-average fair value of options granted</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 20%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.13</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected terms (in years)</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"> <font style="color: black">2.33-5</font></font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected volatility</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"> <font style="color: black">80% - 372</font></font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Risk-free interest rate</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"> <font style="color: black">0.30%-1.39</font></font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Dividend yield</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><b> </b>The following table summarizes
information about stock options outstanding and exercisable at September 30, 2013:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="2" style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options Outstanding</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options Exercisable</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Weighted</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Average</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Weighted</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Weighted</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Remaining</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Average</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Average</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Range of</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Number</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Contractual</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Exercise</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Number</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Exercise</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Exercise Prices</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Outstanding</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Life in Years</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Price</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Exercisable</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Price</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 1%; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 18%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2.40-3.20</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">250,000</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.82</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2.80</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">250,000</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2.80</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">3.60 - $4.50</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">565,568</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">3.50</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4.10</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">495,362</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4.12</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">6.00 - $9.00</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">423,103</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">8.78</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">8.01</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">59,662</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">8.37</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">10.75</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">7,603</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4.21</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">10.75</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5,702</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">10.75</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">28.00 - $80.00</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">7,180</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">6.32</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">40.18</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">7,180</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">40.18</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">1,253,454</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.77</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.41</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">817,906</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4.39</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The stock-based compensation for all
stock options was $577,553 and $1,378,949 during the three and nine months ended September 30, 2013, respectively.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>Restricted Stock Units </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Restricted stock unit, or 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 shares on the
grant date, is expensed over the vesting period. Unvested portions of RSUs issued to consultants are remeasured on an interim basis
until vesting criteria is met. On May 2, 2013, the Board of Directors of the Company amended and restated the Plan to provide for
the issuance of RSUs under the Plan.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 2, 2013, the Company entered
into an amended and restated employment agreement with its CEO, Mark Baum. Among other things, the amended and restated employment
agreement provides for the issuance of 1,250,000 RSUs to Mr. Baum, pursuant to the Plan. Of these RSUs, 200,000 vest on the third
anniversary of the RSU grant based on continued service to the Company and the remaining 1,050,000 RSUs will vest based on the
satisfaction of certain market-based and continued service conditions (the “Baum Performance Equity Award”). The Baum
Performance Equity Award vests three years from the date of grant contingent upon the satisfaction of certain market-based vesting
criteria during the three year period. The market-based vesting criteria are separated into five equal tranches and require that
the Company achieve and maintain certain stock price targets ranging from $10 per share to $30 per share during the three year
period following the grant date. With certain limited exceptions, Mr. Baum must be employed with the Company on the third anniversary
of the grant date in order for the Baum Performance Equity Award to vest. These market-based vesting conditions are further described
below:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">  </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 20%; border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche</font></td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 56%; border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Number of Shares</font></td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 20%; border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Target Share Price</font></td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 1</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">19.05% of the Baum Performance Equity Award granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">10.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 2</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">19.05% of the Baum Performance Equity Award granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">15.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 3</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">19.05% of the Baum Performance Equity Award granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">20.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 4</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">19.05% of the Baum Performance Equity Award granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">25.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 5</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">23.80% of the Baum Performance Equity Award granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">30.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">  </p>
<p style="font: 10pt/normal 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, Mr. Baum must be in continuous service with the Company through the
third anniversary of the grant date. Any unvested RSUs under the Baum Performance Equity Award will be forfeited on the third anniversary
of the grant date.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Under the terms of the employment agreement
with Mr. Baum, the earning and issuance of any shares under the Baum Performance Equity Award that would exceed the number of shares
available for grant and/or the applicable annual per person grant limit for performance-based restricted stock units under the
Plan are subject to approval by the Board of Directors and the Company’s stockholders of an increase in the number of shares
available for grant and the applicable annual per person grant limit for performance-based restricted stock units under the Plan.
At the time of grant in May 2013, the per person grant limit under the Plan for grants of performance-based restricted stock units
was 600,000 shares. The Board approved an amendment to the Plan to increase to the number of shares available for grant from 2,400,000
to 5,000,000 shares and the applicable annual per person grant limit from 600,000 to 1,250,000 shares on May 2, 2013. The amendment
to the Plan was required to be approved by the Company’s stockholders. On September 27, 2013, a majority of the Company’s
stockholders approved the Plan amendment and the remaining 450,000 RSUs were granted on that date pursuant to the Baum Performance
Equity Award.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Concurrent with the issuance of the
450,000 RSUs, Mr. Baum agreed to cancel 120,000 unvested RSUs previously granted to Mr. Baum in July 2012. As a result, the Company
has treated the issuance as a modification of the RSU grant made to Mr. Baum in July 2012. The total compensation cost to be recognized
by the Company is equal to the original grant date fair value of the canceled RSUs plus any incremental cost calculated as the
excess of the fair value of the 450,000 RSUs over the fair value of the canceled 120,000 RSUs on the modification date, which is
September 27, 2013. The initial fair value of the 450,000 RSUs pursuant to the Baum Performance Equity Award granted to Mr. Baum
was $189,000, no incremental cost was associated with the exchange of RSUs, and as of September 30, 2013, the amount of unamortized
stock based compensation that has not been expensed related to these unvested RSUs grants is $173,167. The 450,000 RSUs pursuant
to the Baum Performance Equity Award were valued using a Monte Carlo Simulation with a three year life, 75% volatility and a risk
free interest rate of 0.64%.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The initial fair value of the 200,000
RSUs and 600,000 RSUs pursuant to the Baum Performance Equity Award granted to Mr. Baum was $3,515,090 and as of September 30,
2013, the amount of unamortized stock based compensation that has not been expensed related to the unvested RSUs grants is $3,051,855.
The 600,000 RSUs pursuant to the Baum Performance Equity Award were valued using a Monte Carlo Simulation with a three year life,
75% volatility and a risk free interest rate of 0.30%.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 24, 2013, the Company granted
100,000 RSUs to a consultant that will vest based on the satisfaction of certain market-based conditions subject to the consultant’s
continued service, among other things. These market-based vesting conditions are further described below:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 30%; border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche</font></td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 34%; border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Number of Shares</font></td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 30%; border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Target Share Price</font></td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 1</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">20,000 shares</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">10.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 2</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">20,000 shares</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">15.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 3</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">20,000 shares</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">20.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 4</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">20,000 shares</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">25.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 5</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">20,000 shares</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">30.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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 during the Measurement Period must be at or above the Target Share Price for such tranche ((i) and (ii), the
“Stock Price Conditions”); and (iii) with certain limited exceptions, 50% of the RSUs subject to a tranche will vest
on the quarterly anniversary of the grant date following the satisfaction of the Stock Price Conditions with respect to that tranche,
subject to the consultant being in continuous service with the Company on such quarterly anniversary and the remaining 50% shall
vest on the second anniversary of the grant date if (a) the Stock Price Conditions have been satisfied with respect to that tranche
prior to the second anniversary of the grant date and (b) the consultant is and has been in continuous service with the Company
on the second anniversary of the grant date. All unvested RSUs will be forfeited on the second anniversary of the grant date.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The initial value of the 100,000 RSUs
with market-based vesting conditions granted to the consultant was $288,000, and as of September 30, 2013 the remeasured fair value
of those RSUs was $27,000. The amount of unamortized stock-based compensation that has not been expensed related to the unvested
RSU grant is $22,500. The 100,000 RSUs are valued using a Monte Carlo Simulation with a 2 year life (based on the grant date),
75%-80% volatility and risk free interest rates of 0.26%-0.36%.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In June 2013, the Board of Directors
approved a one-time grant of 6,865 RSUs (or an aggregate of 34,325 RSUs) to non-employee directors with an aggregate fair value
of $271,854. The RSUs vest in full 13 months from the date of grant subject to the director being in continuous service with the
Company and have certain deferral features intended to be compliant with Internal Revenue Code Section 409A. Once vesting conditions
have been achieved, receipt of the shares underlying the RSUs will be deferred until the directors resign. On September 30, 2013,
a director resigned and forfeited all 6,865 unvested RSUs held by him.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">A summary of the Company’s RSU activity and related
information for the nine months ended September 30, 2013 is as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Number of RSUs</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Average</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Grant Date Fair Value</p></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">RSUs outstanding - January 1, 2013</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 18%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">200,000</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 18%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">3.25</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">RSUs granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">1,384,325</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">3.23</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">RSUs vested</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">(40,000</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">)</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">3.25</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">RSUs cancelled/forfeit</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">(166,865</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">)</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">3.44</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Balance at September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">1,377,460</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">3.20</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 18, 2012, a consultant was issued
40,000 RSUs valued at $130,000, and on September 30, 2013, these RSUs were cancelled.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As of September 30, 2013, the total
unrecognized compensation expense related to unvested RSUs was approximately $3,380,000 (including recognized and unrecognized
expenses of the remeasured fair value of consultant RSUs) which are expected to be recognized over a weighted-average period of
2.49 years, based on estimated vesting schedules. The stock-based compensation for RSU’s was $187,807 and $484,826 during
the three and nine months ended September 30, 2013, respectively.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Warrants</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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, note holders, underwriters and to non-employees for
services rendered or to be rendered in the future.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2013, the Company issued
a warrant to purchase 30,000 shares of the Company’s common stock to a consultant with an exercise price of $5.25 per share.
The warrants expire three years following the issuance date, and vest as follows: 10,000 shares vested immediately upon execution
of the consulting agreement, and the remaining shares will vest in 4,000 share installments on each of the five monthly periods
following the date of the consulting agreement provided the consultant continues to provide services to the Company as of the applicable
vesting date.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2013, the Company issued a warrant
to purchase 60,000 shares of the Company’s common stock to a consultant with an exercise price of $8.50 per share, in consideration
for services to be provided over a six month term. The warrants expire five years following the issuance date, vest immediately,
are non-forfeitable, and become exercisable in January 2014. The Company recorded an initial stock-based prepaid consulting expense
for the fair value of the warrants totaling $319,786, which is being amortized over the length of the consulting service term.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">A summary of the activity of the warrants for the nine months
ended September 30, 2013 is as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Number of Shares Subject to Warrants Outstanding</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Avg.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise Price</p></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Warrants outstanding - January 1, 2013</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 20%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">556,872</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 20%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">7.66</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">269,860</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.97</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Exercised</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expired</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">(5,682</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">)</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">176.00</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Warrants outstanding - September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">821,050</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.94</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Weighted average remaining contractual life of the outstanding warrants in years - September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2.45</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The fair value of each warrant is estimated
on the date of grant using the Black-Scholes-Merton option pricing model. 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 the warrants issued:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black"><b>2013</b></font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 79%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Weighted-average fair value of warrants granted</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 18%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.12</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected terms (in years)</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2.6-5</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected volatility</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">85%-346</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Risk-free interest rate</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">0.32%-1.31</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Dividend yield</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">-</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">A list of the warrants outstanding as of September 30, 2013
is included in the table below:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="9" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Warrants Outstanding</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Warrants Exercisable</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Warrants</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Exercise</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Warrants</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expiration</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Warrant Series</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Issue Date</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Outstanding</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Price</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Exercisable</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Date</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 27%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">DermaStar</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4/25/2012</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">48,262</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.93</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">48,262</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4/25/2015</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">April PPM</font></td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4/25/2012</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">502,928</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.93</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">502,928</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4/25/2015</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Underwriter Warrants</font></td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2/7/2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">179,860</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.25</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">179,860</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2/7/2018</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">IR Consultant</font></td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2/28/2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">30,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.25</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">30,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2/28/2016</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">IR Consultant</font></td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">7/19/2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">60,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">8.50</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">7/19/2018</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">821,050</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.94</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">761,050</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">The stock-based compensation for warrants was $151,253 and
$308,883 during the three and nine months ended September 30, 2013, respectively.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>NOTE 4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts payable and accrued expenses
consisted of the following:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"> <b>September 30, 2013</b></font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"> <b>December 31, 2012</b></font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Accounts payable</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 18%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">697,905</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 18%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">286,686</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Accrued offering costs</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">185,337</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Deferred rent</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,477</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Other accrued expenses</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">27,598</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">21,440</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Stock-based compensation accrual</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">139,444</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Total accounts payable and accrued expenses</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">725,503</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">635,384</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">There were 20,000 shares of the Company’s
restricted common stock underlying the stock-based compensation accrual at December 31, 2012. The stock-based compensation related
to restricted common stock issuances and accruals was $(48,786) and $143,553 during the three and nine months ended September
30, 2013, respectively. During the three months ended September 30, 2013, the Company reversed $88,450 in expenses related to
stock-based compensation accruals connected to the termination of a consulting agreement.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>NOTE 2. RESTRICTED SHORT-TERM INVESTMENT </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The restricted short-term investment
at September 30, 2013 consists of a certificate of deposit, which is classified as held-to-maturity. At September 30, 2013, the
fair value of this investment approximated its amortized cost.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">At September 30, 2013, the certificate
of deposit of $50,066 was classified as a current asset. The certificate of deposit is required as collateral under the Company’s
corporate credit card agreement and automatically renews every twelve months.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 1. OVERVIEW, BASIS OF PRESENTATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></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"><b>Company and Background</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Imprimis Pharmaceuticals, Inc. (“Imprimis”,
the “Company”, “we”, “us”, or “our”) is a pharmaceutical company focused on commercializing
novel drug formulations invented by physicians and pharmacists through their clinical experience with patients, as well as proprietary
vehicles to deliver drugs.  The Company expects to develop and commercialize its proprietary drug formulations in specific
therapeutic areas of interest primarily through licensing arrangements with select compounding pharmacies, physicians and other
healthcare organizations.  In addition, the Company may choose to utilize the regulatory pathway provided by Section 505(b)(2)
of the Federal Food, Drug and Cosmetic Act, which generally allows a sponsor of a new drug to rely on the FDA’s earlier findings
of safety and/or effectiveness, in connection with certain drug development opportunities. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><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; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On February 28, 2012, the Company changed its
name from Transdel Pharmaceuticals, Inc. to Imprimis Pharmaceuticals, Inc. All prior references to Transdel Pharmaceuticals, Inc.
have been changed to Imprimis Pharmaceuticals, Inc. to reflect the change. On February 28, 2012, the Company effected a one-for-eight
reverse stock split and on February 7, 2013, the Company effected a one-for-five reverse stock split. All share and per share amounts
and calculations in this report reflect the effects of these reverse stock splits.</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">Imprimis has prepared the accompanying unaudited
condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of
America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.
In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the nine months ended September 30, 2013 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2013. For further information, refer to the Company’s audited consolidated
financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December
31, 2012.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Principles of Consolidation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On September 17, 2007, Imprimis entered into
an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”) by and among Imprimis, Transdel Pharmaceuticals
Holdings, Inc., a privately held Nevada corporation (“Transdel Holdings”), and Trans-Pharma Acquisition Corp., a newly
formed, wholly-owned Delaware subsidiary of Imprimis (“Acquisition Sub”). Upon closing of the merger transaction contemplated
under the Merger Agreement (the “Merger”), Acquisition Sub merged with and into Transdel Holdings, and Transdel Holdings,
as the surviving corporation, became a wholly-owned subsidiary of Imprimis. As a result of the Merger, the former owners of Transdel
Holdings became the controlling stockholders of Imprimis. Accordingly, the merger of Transdel Holdings and Imprimis is a reverse
merger that has been accounted for as a recapitalization of Transdel Holdings.</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">Effective on September 17, 2007, and for all
reporting periods thereafter, Imprimis’ operating activities, including any prior comparative period, include only those
of Transdel Holdings. All references to share and per share amounts in the accompanying condensed consolidated financial statements
and footnotes have been restated to reflect the aforementioned share exchange. All significant intercompany accounts and transactions
have been eliminated in consolidation.</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">On June 20, 2011, Transdel Holdings was merged
with Imprimis Pharmaceuticals, Inc., at which time Transdel Holdings ceased as a corporation, and Imprimis Pharmaceuticals, Inc.
remains as the sole surviving corporation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Development Stage Enterprise </b></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">The Company is a development stage company
as defined under Financial Accounting Standards Board (“FASB”) guidance. All losses accumulated since inception have
been considered as part of the Company’s development stage activities.</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">These condensed consolidated financial statements
contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is a development
stage enterprise and has incurred recurring operating losses, has had negative operating cash flows and has not recognized any
significant revenues since July 24, 1998 (Inception). In addition, the Company has a deficit accumulated during the development
stage of approximately $29.9 million at September 30, 2013, and anticipates incurring further losses through the remainder of the
fiscal year 2013 and beyond. The Company has not yet generated significant sales revenue and has funded its operating losses to
date through debt and equity offerings and borrowings under its line of credit. The Company believes that its existing cash and
cash equivalents will be sufficient to cover its cash flow requirements for at least the next twelve months.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><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; text-indent: 0.5in"> </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, and other overhead expenses, clinical trials, contract services and outsourced
contracts.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Intellectual Property</b><i> </i></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">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 we have not identified an alternative future use for the acquired rights,
and are capitalized in situations where we have identified an alternative future use. No costs associated with acquiring intellectual
property rights have been capitalized to date. Costs of maintaining intellectual property rights are expensed as incurred.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></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; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company will recognize 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. <font style="color: black">The Company believes
it will not generate significant revenues until the Company is able to commercialize one or more of its product candidates. Also,
effective sales and marketing support must be in place for either the drug preparations or any other products the Company may develop
in order to generate any revenues. The Company estimates that it will not generate significant revenues at this time from sales
of its products during the 2013 fiscal year.</font></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"><i>Product Revenues</i></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">Determination of criteria (3) and (4) will
be based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability
of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments will
be provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product has
not been delivered or for which services have not been rendered or are subject to refund until such time that the Company and the
customer jointly determine that the product has been delivered or services have been rendered or no refund will be required.</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"><i>License Revenues</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><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 licensed 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; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Non-refundable, up-front fees that are not
contingent on any future performance by us, and require no consequential continuing involvement on our part, are recognized as
revenue when the license term commences and the licensed data, technology and/or compound is delivered. Such deliverables may include
physical quantities of compounds, design of the compounds and structure-activity relationships, the conceptual framework and mechanism
of action, and rights to the patents or patents pending for such compounds. We defer recognition of non-refundable upfront fees
if we have 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 that is separate and independent of our performance under the other elements
of the arrangement. In addition, if we have required continuing involvement through research and development services that are
related to our proprietary know-how and expertise of the delivered technology, or can only be performed by us, then such up-front
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; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="color: black">During the
three and nine months ended September 30, 2013, the Company recorded $2,500 and $7,500, respectively, in revenues, for
non-refundable royalty advances. In January 2013, the Company </font>entered into a license agreement with resolutionMD, LLC
granting resolutionMD, LLC rights to its Accudel delivery technology to be used for anti-cellulite formulations. Under the
license agreement, the Company will receive $10,000 as a guaranteed minimum royalty amount for fiscal 2013 and, if
applicable, additional royalty payments based on a percent (generally, 5%-7%) of net sales of any products covered under the
license agreement. The license agreement with resolutionMD, LLC, unless terminated earlier, has a term of ten years following
the first commercial sale of a product that is covered under the license agreement. <font style="color: black">The Company
does not anticipate that the license agreement with resolutionMD, LLC will generate significant revenues for the 2013 fiscal
year. </font></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"><b>Income Taxes</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </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 Accounting Standards Codification (“ASC”) 740, “Income Taxes”, or ASC 740. As of September
30, 2013, there were no unrecognized tax benefits included in the condensed 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 condensed consolidated balance sheets at September
30, 2013 and December 31, 2012, and has not recognized interest and/or penalties in the condensed consolidated statements of operations
for the periods ended September 30, 2013 and 2012. The Company is subject to taxation in the United States and California. The
Company’s tax years for 2000 and forward are subject to examination by the federal and state tax authorities due to the carry
forward of unutilized net operating losses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></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; text-indent: 0.5in"> </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; text-indent: 0.5in"> </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; text-indent: 0.5in"> </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 to $250,000 per owner. At September 30, 2013, the Company had approximately $16.6 million
in cash deposits in excess of FDIC limits.</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"><b>Deferred Offering Costs</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 25, 2012, the Company filed with the
Securities and Exchange Commission a registration statement on Form S-1 (as amended, the “Registration Statement”)
in connection with an underwritten public offering of its common stock (the “Public Offering”). At December 31, 2012,
the Company had deferred offering costs of $596,281 for legal, accounting and other expenses directly related to the Public Offering.
The Public Offering closed on February 13, 2013 (see Note 4), and these deferred offering costs and any other costs directly associated
with the Public Offering subsequent to December 31, 2012 were netted against the cash proceeds to the Company arising from the
Public Offering. As a result, there were no deferred offering costs at September 30, 2013.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Furniture and Equipment</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Furniture and equipment is stated at cost less
accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of three to
five years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Deferred Rent </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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 is recorded as an adjustment to deferred rent.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Fair Value Measurements</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 16px; text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">●</font></td>
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">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; line-height: 115%"> </td>
<td style="text-align: justify; line-height: 115%"> </td></tr>
<tr style="vertical-align: top">
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">●</font></td>
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">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; line-height: 115%"> </td>
<td style="text-align: justify; line-height: 115%"> </td></tr>
<tr style="vertical-align: top">
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">●</font></td>
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">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/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">At September 30, 2013 and December 31,
2012, the Company did not have any financial assets or liabilities which are measured on a recurring basis. At September 30, 2013
and December 31, 2012, the Company’s financial instruments include cash and cash equivalents, a restricted short-term investment,
accounts payable and accrued expenses, accrued Phase 3 expenses and accrued payroll and related liabilities. The carrying amount
of these financial instruments, except for the restricted short-term investment, approximates fair value due to the short-term
maturities of these instruments. The Company’s restricted short-term investment is carried at amortized cost which approximates
fair value.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>Stock-Based Compensation</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">All stock-based payments to employees,
including grants of stock options to employees, directors and consultants, warrants and restricted stock grants, are recognized
in the condensed consolidated financial statements based upon their fair values.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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 their vesting
terms. The measurement date for the fair value of the equity instruments issued is determined at 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 fair value of the equity instrument is primarily
recognized over the term of the consulting agreement. In accordance with 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 fair value of
nonforfeitable equity instruments issued for future consulting services as prepaid stock-based consulting expenses in its condensed
consolidated balance sheets (see Note 3.).</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recorded stock-based compensation
(including the amortization of stock-based prepaid consulting fees) related to equity instruments granted to employees, directors
and consultants as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For The Three</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For The Three</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For the Nine</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For the Nine</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2012</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2012</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 40%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Employees - selling, general and administrative</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">525,734</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">180,630</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">990,632</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">298,854</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Employees - research and development</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">32,189</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">61,299</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">143,939</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">143,711</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Directors - selling, general and administrative</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">84,031</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">331,264</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">332,281</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">898,679</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Consultants - selling, general and administrative</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">160,088</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">80,849</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">665,615</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">160,836</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Consultants - research and development</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">76,535</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">194,494</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">878,577</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">654,042</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">2,326,961</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">1,502,080</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>Basic and Diluted Net Loss per Common Share</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic and diluted net loss applicable
to common stock 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 or, “if converted” method) from convertible notes, preferred stock,
stock options, unvested restricted stock units (“RSUs”) and warrants were 3,451,964 and 1,669,078 at <font style="color: black">September
30</font>, 2013 and 2012, respectively, and are excluded from the calculation of diluted net loss per share for all periods presented
because the effect is anti-dilutive.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows the computation
of basic and diluted loss per share of common stock for the three and nine months ended September 30, 2013 and 2012:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For The Three</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For The Three</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For the Nine</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For the Nine</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2012</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2012</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 36%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif; color: black">Net loss</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(2,077,464</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(1,245,826</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(5,760,997</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(3,930,507</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif; color: black">Deemed dividend to preferred stockholders</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(200,000</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Numerator – net loss attributable to common stockholders</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(2,077,464</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(1,245,826</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(5,760,997</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(4,130,507</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Denominator – weighted average number of shares outstanding, basic and diluted</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">8,961,678</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">6,219,821</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">8,551,159</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">3,728,513</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Net loss per share, basic and diluted</b></font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(0.23</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(0.20</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(0.67</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(1.11</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Use of Estimates</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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, 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 valuation of deferred taxes and stock-based compensation issued to employees and non-employees. Actual results
could differ from those estimates.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Reclassifications</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Certain prior period items and amounts have
been reclassified to conform to the classifications used to prepare the 2013 condensed consolidated financial statements. These
reclassifications had no material impact on the Company’s financial position, results of operations, or cash flows as previously
reported.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><b> </b></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; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2013, the FASB issued Accounting Standards
Update (“ASU”) No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward,
a Similar Tax Loss, or a Tax Credit Carryforward Exists.” ASU 2013-11 provides explicit guidance on the financial statement
presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward
exists. The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December
15, 2013, with an option for early adoption. The Company intends to adopt this guidance at the beginning of its first quarter of
fiscal year 2014, and is currently evaluating the impact on its financial statements and disclosures.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Proposed Amendments to Current
Accounting Standards.</i> The FASB is currently working on amendments to existing accounting standards governing a number of
areas including, but not limited to, revenue recognition and lease accounting.</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 2010, the FASB issued an exposure draft, <i>Revenue
from Contracts with Customers</i>, which would supersede most of the existing guidance on revenue recognition in ASC Topic 605,
<i>Revenue Recognition</i>. In November 2011, the FASB re-exposed this draft and it expects a final standard to be issued
in the first quarter of calendar 2014. As the standard-setting process is still ongoing, the Company is unable to determine
the impact this proposed change in accounting will have in the Company’s consolidated financial statements at this time.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2010, the FASB issued an exposure
draft, <i>Leases</i>, which would result in significant changes to the accounting requirements for both lessees and lessors in
ASC Topic 840, <i>Leases</i>. In May 2013, the FASB re-exposed this draft and the comment period was closed in September 2013.
As the standard-setting process is still ongoing, the Company is unable to determine the impact this proposed change in accounting
will have in the Company’s condensed consolidated financial statements at this time.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </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; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2011, the FASB issued ASU 2011-11,
“Disclosures about Offsetting Assets and Liabilities.” This pronouncement was issued to enhance disclosure requirements
surrounding the nature of an entity’s right to offset and related arrangements associated with its financial instruments
and derivative instruments. This new guidance requires companies to disclose both gross and net information about instruments and
transactions eligible for offset in the statement of financial position and instruments and transactions subject to master netting
arrangements. This pronouncement is effective for reporting periods beginning on or after January 1, 2013. The adoption of ASU
2011-11 did not have a material impact on our condensed consolidated financial statements.</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 January 2013, the FASB issued ASU 2013-01,
“Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.” This pronouncement was issued to address
implementation issues about the scope of ASU 2011-11 and to clarify the scope of the offsetting disclosures and address any unintended
consequences. This pronouncement is effective for reporting periods beginning on or after January 1, 2013. The adoption of ASU
2013-01 did not have a material impact on our condensed consolidated financial statements.</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; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On February 28, 2012, the Company changed its
name from Transdel Pharmaceuticals, Inc. to Imprimis Pharmaceuticals, Inc. All prior references to Transdel Pharmaceuticals, Inc.
have been changed to Imprimis Pharmaceuticals, Inc. to reflect the change. On February 28, 2012, the Company effected a one-for-eight
reverse stock split and on February 7, 2013, the Company effected a one-for-five reverse stock split. All share and per share amounts
and calculations in this report reflect the effects of these reverse stock splits.</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">Imprimis has prepared the accompanying unaudited
condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of
America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.
In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the nine months ended September 30, 2013 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2013. For further information, refer to the Company’s audited consolidated
financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December
31, 2012.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Principles of Consolidation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On September 17, 2007, Imprimis entered into
an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”) by and among Imprimis, Transdel Pharmaceuticals
Holdings, Inc., a privately held Nevada corporation (“Transdel Holdings”), and Trans-Pharma Acquisition Corp., a newly
formed, wholly-owned Delaware subsidiary of Imprimis (“Acquisition Sub”). Upon closing of the merger transaction contemplated
under the Merger Agreement (the “Merger”), Acquisition Sub merged with and into Transdel Holdings, and Transdel Holdings,
as the surviving corporation, became a wholly-owned subsidiary of Imprimis. As a result of the Merger, the former owners of Transdel
Holdings became the controlling stockholders of Imprimis. Accordingly, the merger of Transdel Holdings and Imprimis is a reverse
merger that has been accounted for as a recapitalization of Transdel Holdings.</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">Effective on September 17, 2007, and for all
reporting periods thereafter, Imprimis’ operating activities, including any prior comparative period, include only those
of Transdel Holdings. All references to share and per share amounts in the accompanying condensed consolidated financial statements
and footnotes have been restated to reflect the aforementioned share exchange. All significant intercompany accounts and transactions
have been eliminated in consolidation.</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">On June 20, 2011, Transdel Holdings was merged
with Imprimis Pharmaceuticals, Inc., at which time Transdel Holdings ceased as a corporation, and Imprimis Pharmaceuticals, Inc.
remains as the sole surviving corporation.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Development Stage Enterprise </b></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">The Company is a development stage company
as defined under Financial Accounting Standards Board (“FASB”) guidance. All losses accumulated since inception have
been considered as part of the Company’s development stage activities.</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">These condensed consolidated financial statements
contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is a development
stage enterprise and has incurred recurring operating losses, has had negative operating cash flows and has not recognized any
significant revenues since July 24, 1998 (Inception). In addition, the Company has a deficit accumulated during the development
stage of approximately $29.9 million at September 30, 2013, and anticipates incurring further losses through the remainder of
the fiscal year 2013 and beyond. The Company has not yet generated significant sales revenue and has funded its operating losses
to date through debt and equity offerings and borrowings under its line of credit. The Company believes that its existing cash
and cash equivalents will be sufficient to cover its cash flow requirements for at least the next twelve months.</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; text-indent: 0.5in"> </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, and other overhead expenses, 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>Revenue Recognition and Deferred Revenue</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company will recognize 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. <font style="color: black">The Company believes
it will not generate significant revenues until the Company is able to commercialize one or more of its product candidates. Also,
effective sales and marketing support must be in place for either the drug preparations or any other products the Company may develop
in order to generate any revenues. The Company estimates that it will not generate significant revenues at this time from sales
of its products during the 2013 fiscal year.</font></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"><i>Product Revenues</i></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">Determination of criteria (3) and (4) will
be based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability
of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments will
be provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product has
not been delivered or for which services have not been rendered or are subject to refund until such time that the Company and the
customer jointly determine that the product has been delivered or services have been rendered or no refund will be required.</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"><i>License Revenues</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><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 licensed 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; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Non-refundable, up-front fees that are not
contingent on any future performance by us, and require no consequential continuing involvement on our part, are recognized as
revenue when the license term commences and the licensed data, technology and/or compound is delivered. Such deliverables may include
physical quantities of compounds, design of the compounds and structure-activity relationships, the conceptual framework and mechanism
of action, and rights to the patents or patents pending for such compounds. We defer recognition of non-refundable upfront fees
if we have 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 that is separate and independent of our performance under the other elements
of the arrangement. In addition, if we have required continuing involvement through research and development services that are
related to our proprietary know-how and expertise of the delivered technology, or can only be performed by us, then such up-front
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; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="color: black">During the
three and nine months ended September 30, 2013, the Company recorded $2,500 and $7,500, respectively, in revenues, for
non-refundable royalty advances. In January 2013, the Company </font>entered into a license agreement with resolutionMD, LLC
granting resolutionMD, LLC rights to its Accudel delivery technology to be used for anti-cellulite formulations. Under the
license agreement, the Company will receive $10,000 as a guaranteed minimum royalty amount for fiscal 2013 and, if
applicable, additional royalty payments based on a percent (generally, 5%-7%) of net sales of any products covered under the
license agreement. The license agreement with resolutionMD, LLC, unless terminated earlier, has a term of ten years following
the first commercial sale of a product that is covered under the license agreement. <font style="color: black">The Company
does not anticipate that the license agreement with resolutionMD, LLC will generate significant revenues for the 2013 fiscal
year.</font></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; text-indent: 0.5in"><b> </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 Accounting Standards Codification (“ASC”) 740, “Income Taxes”, or ASC 740. As of September
30, 2013, there were no unrecognized tax benefits included in the condensed 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 condensed consolidated balance sheets at September
30, 2013 and December 31, 2012, and has not recognized interest and/or penalties in the condensed consolidated statements of operations
for the periods ended September 30, 2013 and 2012. The Company is subject to taxation in the United States and California. The
Company’s tax years for 2000 and forward are subject to examination by the federal and state tax authorities due to the
carry forward 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; text-indent: 0.5in"> </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; text-indent: 0.5in"> </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 to $250,000 per owner. At September 30, 2013, the Company had approximately $16.6
million 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>Deferred Offering Costs</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 25, 2012, the Company filed with the
Securities and Exchange Commission a registration statement on Form S-1 (as amended, the “Registration Statement”)
in connection with an underwritten public offering of its common stock (the “Public Offering”). At December 31, 2012,
the Company had deferred offering costs of $596,281 for legal, accounting and other expenses directly related to the Public Offering.
The Public Offering closed on February 13, 2013 (see Note 4), and these deferred offering costs and any other costs directly associated
with the Public Offering subsequent to December 31, 2012 were netted against the cash proceeds to the Company arising from the
Public Offering. As a result, there were no deferred offering costs at September 30, 2013.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Furniture and Equipment</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Furniture and equipment is stated at cost
less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of three
to five years.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Deferred Rent </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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 is recorded as an adjustment to deferred rent.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Fair Value Measurements</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 16px; text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">●</font></td>
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">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; line-height: 115%"> </td>
<td style="text-align: justify; line-height: 115%"> </td></tr>
<tr style="vertical-align: top">
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">●</font></td>
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">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; line-height: 115%"> </td>
<td style="text-align: justify; line-height: 115%"> </td></tr>
<tr style="vertical-align: top">
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">●</font></td>
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">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/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">At September 30, 2013 and December
31, 2012, the Company did not have any financial assets or liabilities which are measured on a recurring basis. At September 30,
2013 and December 31, 2012, the Company’s financial instruments include cash and cash equivalents, a restricted short-term
investment, accounts payable and accrued expenses, accrued Phase 3 expenses and accrued payroll and related liabilities. The carrying
amount of these financial instruments, except for the restricted short-term investment, approximates fair value due to the short-term
maturities of these instruments. The Company’s restricted short-term investment is carried at amortized cost which approximates
fair value.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>Stock-Based Compensation</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">All stock-based payments to employees,
including grants of stock options to employees, directors and consultants, warrants and restricted stock grants, are recognized
in the condensed consolidated financial statements based upon their fair values.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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 their vesting
terms. The measurement date for the fair value of the equity instruments issued is determined at 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 fair value of the equity instrument is primarily
recognized over the term of the consulting agreement. In accordance with 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 fair value of
nonforfeitable equity instruments issued for future consulting services as prepaid stock-based consulting expenses in its condensed
consolidated balance sheets (see Note 3.).</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recorded stock-based compensation
(including the amortization of stock-based prepaid consulting fees) related to equity instruments granted to employees, directors
and consultants as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For The Three</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For The Three</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For the Nine</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For the Nine</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2012</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2012</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 40%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Employees - selling, general and administrative</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">525,734</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">180,630</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">990,632</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">298,854</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Employees - research and development</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">32,189</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">61,299</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">143,939</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">143,711</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Directors - selling, general and administrative</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">84,031</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">331,264</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">332,281</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">898,679</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Consultants - selling, general and administrative</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">160,088</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">80,849</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">665,615</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">160,836</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Consultants - research and development</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">76,535</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">194,494</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">878,577</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">654,042</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">2,326,961</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">1,502,080</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>Basic and Diluted Net Loss per Common Share</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic and diluted net loss applicable
to common stock 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 or, “if converted” method) from convertible notes, preferred stock,
stock options, unvested restricted stock units (“RSUs”) and warrants were 3,451,964 and 1,669,078 at <font style="color: black">September
30</font>, 2013 and 2012, respectively, and are excluded from the calculation of diluted net loss per share for all periods presented
because the effect is anti-dilutive.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows the computation
of basic and diluted loss per share of common stock for the three and nine months ended September 30, 2013 and 2012:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For The Three</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For The Three</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For the Nine</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For the Nine</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2012</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2012</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 36%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif; color: black">Net loss</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(2,077,464</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(1,245,826</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(5,760,997</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(3,930,507</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif; color: black">Deemed dividend to preferred stockholders</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(200,000</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Numerator – net loss attributable to common stockholders</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(2,077,464</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(1,245,826</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(5,760,997</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(4,130,507</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Denominator – weighted average number of shares outstanding, basic and diluted</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">8,961,678</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">6,219,821</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">8,551,159</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">3,728,513</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Net loss per share, basic and diluted</b></font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(0.23</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(0.20</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(0.67</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(1.11</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Use of Estimates</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal 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, 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 valuation of deferred taxes and stock-based compensation issued to employees and non-employees. Actual results
could differ from those estimates.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recorded stock-based compensation
(including the amortization of stock-based prepaid consulting fees) related to equity instruments granted to employees, directors
and consultants as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For The Three</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For The Three</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For the Nine</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For the Nine</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2012</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2012</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 40%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Employees - selling, general and administrative</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">525,734</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">180,630</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">990,632</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">298,854</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Employees - research and development</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">32,189</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">61,299</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">143,939</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">143,711</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Directors - selling, general and administrative</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">84,031</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">331,264</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">332,281</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">898,679</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Consultants - selling, general and administrative</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">160,088</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">80,849</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">665,615</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">160,836</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Consultants - research and development</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">76,535</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">194,494</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">878,577</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">654,042</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">2,326,961</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">1,502,080</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows the computation
of basic and diluted loss per share of common stock for the three and nine months ended September 30, 2013 and 2012:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For The Three</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For The Three</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For the Nine</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">For the Nine</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Months Ended</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2012</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">September 30, 2012</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 36%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif; color: black">Net loss</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(2,077,464</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(1,245,826</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(5,760,997</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(3,930,507</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif; color: black">Deemed dividend to preferred stockholders</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(200,000</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Numerator – net loss attributable to common stockholders</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(2,077,464</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(1,245,826</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(5,760,997</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(4,130,507</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">Denominator – weighted average number of shares outstanding, basic and diluted</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">8,961,678</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">6,219,821</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">8,551,159</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">3,728,513</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Net loss per share, basic and diluted</b></font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(0.23</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(0.20</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(0.67</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">(1.11</font></td>
<td style="line-height: 115%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts payable and accrued expenses
consisted of the following:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"> <b>September 30, 2013</b></font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"> <b>December 31, 2012</b></font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Accounts payable</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 18%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">697,905</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 18%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">286,686</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Accrued offering costs</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">185,337</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Deferred rent</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,477</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Other accrued expenses</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">27,598</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">21,440</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Stock-based compensation accrual</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">139,444</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Total accounts payable and accrued expenses</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">725,503</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">635,384</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="margin: 0pt"></p>
2326961
1502080
878577
654042
990632
298854
143939
143711
332281
665615
160836
194494
898679
160088
180630
32189
61299
84031
331264
525734
80849
76535
725503
635384
139444
27598
21440
2477
185337
697905
286686
20000
143553
-48786
29900000
0.05
0.07
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of the Plan activity with
respect to options to purchase common stock for the nine months ended September 30, 2013 is as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Number of shares</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Avg.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise Price</p></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Avg.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Remaining</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Contractual Life</p></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Aggregate</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Intrinsic Value</p></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 40%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options outstanding - January 1, 2013</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">905,806</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.26</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 12%; text-align: right; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 12%; text-align: right; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">569,653</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">6.93</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options exercised</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">(1,030</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">)</font></td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">4.00</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options cancelled/forfeit</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">(220,975</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">)</font></td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">8.72</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options outstanding - September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">1,253,454</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.41</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.77</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">651,435</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options exercisable</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">817,906</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4.39</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4.43</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">613,752</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options vested and expected to vest</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">1,209,899</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.34</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.68</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">647,667</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal 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 options
granted to employees:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Nine months ended</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>September 30, 2013</b></p></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Weighted-average fair value of options granted</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 20%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">6.82</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected terms (in years)</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">5.8</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected volatility</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"> <font style="color: black">104%-123</font></font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Risk-free interest rate</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"> <font style="color: black">0.86 %-1.69</font></font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Dividend yield</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="margin: 0pt"> </p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal 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 options
granted to consultants:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Nine months ended</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>September 30, 2013</b></p></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Weighted-average fair value of options granted</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 20%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.13</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected terms (in years)</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"> <font style="color: black">2.33-5</font></font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected volatility</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"> <font style="color: black">80% - 372</font></font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Risk-free interest rate</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"> <font style="color: black">0.30%-1.39</font></font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Dividend yield</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">These market-based vesting conditions
are further described below:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">  </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 20%; border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche</font></td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 56%; border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Number of Shares</font></td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 20%; border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Target Share Price</font></td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 1</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">19.05% of the Baum Performance Equity Award granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">10.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 2</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">19.05% of the Baum Performance Equity Award granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">15.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 3</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">19.05% of the Baum Performance Equity Award granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">20.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 4</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">19.05% of the Baum Performance Equity Award granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">25.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 5</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">23.80% of the Baum Performance Equity Award granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">30.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="margin: 0pt"> </p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 30%; border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche</font></td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 34%; border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Number of Shares</font></td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td>
<td style="width: 30%; border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Target Share Price</font></td>
<td style="width: 1%; text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 1</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">20,000 shares</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">10.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 2</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">20,000 shares</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">15.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 3</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">20,000 shares</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">20.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 4</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">20,000 shares</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">25.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Tranche 5</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">20,000 shares</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">30.00 or greater</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">A summary of the Company’s RSU activity and related
information for the nine months ended September 30, 2013 is as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Number of RSUs</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Average</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Grant Date Fair Value</p></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">RSUs outstanding - January 1, 2013</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 18%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">200,000</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 18%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">3.25</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">RSUs granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">1,384,325</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">3.23</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">RSUs vested</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">(40,000</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">)</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">3.25</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">RSUs cancelled/forfeit</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">(166,865</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">)</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">3.44</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Balance at September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">1,377,460</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">3.20</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b></b></p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">A summary of the activity of the warrants for the nine months
ended September 30, 2013 is as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Number of Shares Subject to Warrants Outstanding</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Avg.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise Price</p></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Warrants outstanding - January 1, 2013</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 20%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">556,872</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 20%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">7.66</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">269,860</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.97</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Exercised</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expired</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">(5,682</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">)</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">176.00</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Warrants outstanding - September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">821,050</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.94</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Weighted average remaining contractual life of the outstanding warrants in years - September 30, 2013</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2.45</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The fair value of each warrant is estimated
on the date of grant using the Black-Scholes-Merton option pricing model. 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 the warrants issued:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black"><b>2013</b></font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 79%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Weighted-average fair value of warrants granted</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 18%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.12</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected terms (in years)</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2.6-5</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected volatility</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">85%-346</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Risk-free interest rate</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">0.32%-1.31</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Dividend yield</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">-</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">A list of the warrants outstanding as of September 30, 2013
is included in the table below:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="9" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Warrants Outstanding</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Warrants Exercisable</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Warrants</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Exercise</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Warrants</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expiration</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Warrant Series</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Issue Date</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Outstanding</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Price</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Exercisable</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Date</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 27%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">DermaStar</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4/25/2012</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">48,262</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.93</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">48,262</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 12%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4/25/2015</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">April PPM</font></td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4/25/2012</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">502,928</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.93</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">502,928</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4/25/2015</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Underwriter Warrants</font></td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2/7/2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">179,860</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.25</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">179,860</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2/7/2018</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">IR Consultant</font></td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2/28/2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">30,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.25</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">30,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2/28/2016</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">IR Consultant</font></td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">7/19/2013</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">60,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">8.50</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">7/19/2018</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">821,050</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.94</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">761,050</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="margin: 0pt"></p>
50066
-5760997
-4130507
-2077464
-1245826
-29865265
200000
300000
-5760997
-3930507
-2077464
-1245826
-29565265
-32448
1210263
-12440
-4221
2199358
-176505
375000
-1195410
-1195410
32448
9805
12440
4221
175439
24658
1730892
-5793445
-2720244
-2089904
-1250047
-27365907
1601927
580240
469480
303666
10720688
4199018
2240004
1622924
946381
16752719
7500
100000
2500
107500
8551159
3728513
8961678
6219821
-0.67
-1.11
-0.23
-.20
176505
3481
2090
9579
24658
1730892
254142
-258034
-61344
-459586
229563
61371
769524
111871
256367
19115
361349
2500
-100000
2500
-3200159
-1287127
-15871092
-60480
-15308
-79126
450000
976300
50000
50000
100000
2500000
-200000
-200000
27537
281679
168707
100250
10052832
11847146
29336911
16827617
10035615
146160
10990871
6792002
10844711
16827617
10052641
12147146
32777835
1500
1500
56087
100000
196300
1905137
3435314
56087
56087
314961
319786
751793
-50000
-50000
10480
15308
29126
191
191
1600
1600
13600
596281
596281
139444
139444
282997
10750
241701
3451964
1669078
0
0
250000
16600000
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Company and Background</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Imprimis Pharmaceuticals, Inc. (“Imprimis”,
the “Company”, “we”, “us”, or “our”) is a pharmaceutical company focused on commercializing
novel drug formulations invented by physicians and pharmacists through their clinical experience with patients, as well as proprietary
vehicles to deliver drugs.  The Company expects to develop and commercialize its proprietary drug formulations in specific
therapeutic areas of interest primarily through licensing arrangements with select compounding pharmacies, physicians and other
healthcare organizations.  In addition, the Company may choose to utilize the regulatory pathway provided by Section 505(b)(2)
of the Federal Food, Drug and Cosmetic Act, which generally allows a sponsor of a new drug to rely on the FDA’s earlier
findings of safety and/or effectiveness, in connection with certain drug development opportunities.</p>
63180
30058
61276
31494
186542
-88450
219
4.00
5.25
1030
191
35
1840000
8140435
276000
1316116
179860
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">On February 7, 2013, the Company entered into an Underwriting
Agreement (the “Underwriting Agreement”) with MDB Capital Group, LLC.  As contemplated by the Underwriting
Agreement, at the closing of the Public Offering and the over-allotment exercise, the underwriters received warrants (the “Underwriter
Warrants”) to purchase an aggregate of 179,860 shares, or 8.5% of the number of shares sold in the offering (including 8.5%
of shares sold pursuant to their over-allotment option).  The Underwriter Warrants are exercisable at $5.25 per share
(100% of the price of the common stock sold in the offering), commencing on the effective date of the offering and expiring five
years from the effective date of the offering.</font></p>
5000000
0.001
0
0
4.50
269860
1384325
569653
51675
180000
25000
60000
6.00
9.00
8.99
7.02
4.50
8.75
8.90
7.69
8.06
4.50
<p style="margin: 0pt"></p>
<p style="margin: 0pt"><font style="font: 10pt Times New Roman, Times, Serif">The initial fair value of the 200,000 RSUs and 600,000
RSUs pursuant to the Baum Performance Equity Award granted to Mr. Baum was $3,515,090 and as of September 30, 2013, the amount
of unamortized stock based compensation that has not been expensed related to the unvested RSUs grants is $3,051,855.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The options each have 10-year terms and vest quarterly
over three years.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The options have an exercise price of $9.00, the current
market price of the Company’s common stock on the grant date, a 10-year term and vest over a three year period, such that
33% of the options vest on the first anniversary of the grant date and the remaining 67% of the options vest quarterly in equal
installments thereafter over two years.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The options have an exercise price of $8.99, the current
market price of the Company’s common stock on the grant date, a 10-year term and vest quarterly over three years.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The options have an exercise price of $7.02, the current
market price of the Company’s common stock on the grant date, a 10-year term and vest over a 30 month period, such that
6,250 shares vest on the first anniversary of the grant date and the remaining 75% of the options vest in three equal semi-annual
installments thereafter.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The option terminates on March 31, 2017 and vests
over a two year period, with 15,000 options vesting immediately upon issuance and an additional 1,875 options vesting monthly
for the next twenty four months thereafter.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The option will terminate on January 13, 2017 and
vests over an eighteen month period, with approximately 635 options vesting monthly for eighteen months beginning in February
2013. The remeasured fair value of the unvested portion of the stock option as of September 30, 2013, based on the Black-Scholes-Merton
option pricing model, was $10,974.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The options have a 3-year term and vested in full
in August 2013, following completion of certain services.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">On September 26, 2013, the Company and Dr. Brar mutually
agreed to terminate his consulting agreement, and upon termination, the Company accelerated vesting of 50,000 options and cancelled
the remaining 50,000 unvested options.</font></p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"><font style="font: 10pt Times New Roman, Times, Serif">Of these RSUs, 200,000 vest on the third anniversary
of the RSU grant based on continued service to the Company and the remaining 1,050,000 RSUs will vest based on the satisfaction
of certain market-based and continued service conditions (the “Baum Performance Equity Award”).</font></p>
<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 options have a 5-year term and vest over
one year on a quarterly basis, and were granted as consideration for the provision of certain services.</p>
13125
-5682
-166865
-220975
131250
40000
11428
25000
10000
5000
10300
40000
2114
21366
27000
17109
1742000
P2Y1M2D
34882
0.10
600000
1250000
34325
40000
10
30
600000
1250000
600000
2400000
5000000
450000
100000
100000
6865
8947
120000
3515090
189000
288000
271854
130000
3380000
3051855
173167
22500
P2Y5M27D
P3Y
P3Y
P2Y
0.75
0.75
0.75
0.80
0.0064
0.0030
0.0026
0.0036
6865
6865
30000
60000
5.25
8.50
P3Y
P5Y
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The warrants expire three years following
the issuance date, and vest as follows: 10,000 shares vested immediately upon execution of the consulting agreement, and the remaining
shares will vest in 4,000 share installments on each of the five monthly periods following the date of the consulting agreement
provided the consultant continues to provide services to the Company as of the applicable vesting date.</p>
1253454
-1253454
905806
250000
565568
423103
7603
7180
-1030
817906
1209899
5.41
5.26
6.93
4.00
8.72
4.39
5.34
P5Y9M7D
P5Y9M26D
P3Y6M
P8Y9M11D
P4Y2M16D
P6Y3M26D
P4Y5M5D
P5Y8M5D
651435
613752
647667
5.12
3.23
5.13
6.82
P5Y9M18D
P2Y3M29D
P5Y
P5Y
P2Y7M6D
0.85
0.80
1.04
3.46
3.72
1.23
0.0032
0.0030
0.0086
0.0131
0.0139
0.0169
0.00
0.00
2.40
3.60
6.00
28.00
3.20
4.50
9.00
10.75
80.00
5.41
2.8
4.10
8.01
10.75
40.18
817906
250000
495362
59662
5702
7180
4.39
2.80
4.12
8.37
10.75
40.18
0.1905
0.2380
0.1905
0.1905
0.1905
20000
20000
20000
20000
20000
$25.00 or greater
$30.00 or greater
$10.00 or greater
$15.00 or greater
$20.00 or greater
$10.00 or greater
$15.00 or greater
$20.00 or greater
$25.00 or greater
$30.00 or greater
200000
1377460
-40000
3.25
3.20
3.25
3.44
821050
48262
502928
179860
30000
60000
5.94
5.93
5.93
5.25
5.25
8.50
761050
48262
502928
179860
30000
3715
10406
0.03
387900
31200
7000
0.045
0.09
100000
<p style="margin: 0; padding: 0"></p>
<p style="margin: 0; padding: 0"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; padding: 0"><b>NOTE 3. PREPAID EXPENSES AND OTHER CURRENT ASSETS</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; padding: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; padding: 0; text-align: justify">Prepaid expenses and other current assets
consisted of the following (see Note 1. regarding policy for prepaid stock-based consulting expenses):</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; padding: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="font: 10pt Times New Roman, Times, Serif">
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 10pt/115% Times New Roman, Times, Serif; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> <b>September 30, 2013</b></font></td>
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 10pt/115% Times New Roman, Times, Serif; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> <b>December 31,</b> <b>2012</b></font></td>
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; background-color: #CCEEFF">
<td style="width: 58%; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Prepaid stock-based consulting expenses</font></td>
<td style="width: 1%; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="width: 1%; text-align: center; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 18%; text-align: right; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">186,542</font></td>
<td style="width: 1%; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="width: 1%; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="width: 1%; text-align: center; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 18%; text-align: right; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="width: 1%; font: 10pt/115% Times New Roman, Times, Serif"> </td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; background-color: white">
<td style="font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Prepaid
Phase 3 expenses (1)</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: right; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">195,064</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: right; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; background-color: #CCEEFF">
<td style="font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Prepaid insurance</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: right; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">63,180</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: right; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">30,058</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; background-color: white">
<td style="font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Other prepaid expenses and deposits</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="border-bottom: black 1.5pt solid; font: 10pt/115% Times New Roman, Times, Serif; text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font: 10pt/115% Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">61,276</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="border-bottom: black 1.5pt solid; font: 10pt/115% Times New Roman, Times, Serif; text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font: 10pt/115% Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">31,494</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; background-color: #CCEEFF">
<td style="padding-left: 10pt; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Total prepaid expenses</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="border-bottom: black 2.25pt double; font: 10pt/115% Times New Roman, Times, Serif; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 10pt/115% Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">506,062</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="border-bottom: black 2.25pt double; font: 10pt/115% Times New Roman, Times, Serif; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 10pt/115% Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">61,552</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; padding: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; padding: 0">(1) Subsequent to the period ended September 30,
2013, the Company discontinued its Phase 3 clinical trial for Impracor (see Note 7). Due to certain contractual guarantees
related to these prepaid expenses, the Company expects to be reimbursed for these prepayments.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Intellectual Property</b><i> </i></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">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 we have not identified an alternative future use for the acquired rights,
and are capitalized in situations where we have identified an alternative future use. No costs associated with acquiring intellectual
property rights have been capitalized to date. Costs of maintaining intellectual property rights are expensed as incurred.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Reclassifications</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Certain prior period items and amounts
have been reclassified to conform to the classifications used to prepare the 2013 condensed consolidated financial statements.
These reclassifications had no material impact on the Company’s financial position, results of operations, or cash flows
as previously reported.</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; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2013, the FASB issued Accounting Standards
Update (“ASU”) No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward,
a Similar Tax Loss, or a Tax Credit Carryforward Exists.” ASU 2013-11 provides explicit guidance on the financial statement
presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward
exists. The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December
15, 2013, with an option for early adoption. The Company intends to adopt this guidance at the beginning of its first quarter of
fiscal year 2014, and is currently evaluating the impact on its financial statements and disclosures.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Proposed Amendments to Current
Accounting Standards.</i> The FASB is currently working on amendments to existing accounting standards governing a number of
areas including, but not limited to, revenue recognition and lease accounting.</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 2010, the FASB issued an exposure draft, <i>Revenue
from Contracts with Customers</i>, which would supersede most of the existing guidance on revenue recognition in ASC Topic 605,
<i>Revenue Recognition</i>. In November 2011, the FASB re-exposed this draft and it expects a final standard to be issued
in the first quarter of calendar 2014. As the standard-setting process is still ongoing, the Company is unable to determine
the impact this proposed change in accounting will have in the Company’s consolidated financial statements at this time.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2010, the FASB issued an exposure
draft, <i>Leases</i>, which would result in significant changes to the accounting requirements for both lessees and lessors in
ASC Topic 840, <i>Leases</i>. In May 2013, the FASB re-exposed this draft and the comment period was closed in September 2013.
As the standard-setting process is still ongoing, the Company is unable to determine the impact this proposed change in accounting
will have in the Company’s condensed consolidated financial statements at this time.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>Recently Adopted Accounting Pronouncements</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2011, the FASB issued ASU
2011-11, “Disclosures about Offsetting Assets and Liabilities.” This pronouncement was issued to enhance disclosure
requirements surrounding the nature of an entity’s right to offset and related arrangements associated with its financial
instruments and derivative instruments. This new guidance requires companies to disclose both gross and net information about instruments
and transactions eligible for offset in the statement of financial position and instruments and transactions subject to master
netting arrangements. This pronouncement is effective for reporting periods beginning on or after January 1, 2013. The adoption
of ASU 2011-11 did not have a material impact on our condensed consolidated financial statements.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2013, the FASB issued ASU
2013-01, “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.” This pronouncement was issued
to address implementation issues about the scope of ASU 2011-11 and to clarify the scope of the offsetting disclosures and address
any unintended consequences. This pronouncement is effective for reporting periods beginning on or after January 1, 2013. The
adoption of ASU 2013-01 did not have a material impact on our condensed consolidated financial statements.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; padding: 0; text-align: justify">Prepaid expenses and other current assets
consisted of the following (see Note 1. regarding policy for prepaid stock-based consulting expenses):</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; padding: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="font: 10pt Times New Roman, Times, Serif">
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 10pt/115% Times New Roman, Times, Serif; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> <b>September 30, 2013</b></font></td>
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 10pt/115% Times New Roman, Times, Serif; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> <b>December 31,</b> <b>2012</b></font></td>
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; background-color: #CCEEFF">
<td style="width: 58%; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Prepaid stock-based consulting expenses</font></td>
<td style="width: 1%; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="width: 1%; text-align: center; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 18%; text-align: right; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">186,542</font></td>
<td style="width: 1%; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="width: 1%; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="width: 1%; text-align: center; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 18%; text-align: right; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="width: 1%; font: 10pt/115% Times New Roman, Times, Serif"> </td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; background-color: white">
<td style="font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Prepaid
Phase 3 expenses (1)</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: right; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">195,064</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: right; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; background-color: #CCEEFF">
<td style="font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Prepaid insurance</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: right; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">63,180</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: center; font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="text-align: right; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">30,058</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; background-color: white">
<td style="font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Other prepaid expenses and deposits</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="border-bottom: black 1.5pt solid; font: 10pt/115% Times New Roman, Times, Serif; text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font: 10pt/115% Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">61,276</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="border-bottom: black 1.5pt solid; font: 10pt/115% Times New Roman, Times, Serif; text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font: 10pt/115% Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">31,494</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; background-color: #CCEEFF">
<td style="padding-left: 10pt; font: 10pt/115% Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Total prepaid expenses</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="border-bottom: black 2.25pt double; font: 10pt/115% Times New Roman, Times, Serif; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 10pt/115% Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">506,062</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td>
<td style="border-bottom: black 2.25pt double; font: 10pt/115% Times New Roman, Times, Serif; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 10pt/115% Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">61,552</font></td>
<td style="font: 10pt/115% Times New Roman, Times, Serif"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; padding: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; padding: 0">(1) Subsequent to the period ended September 30,
2013, the Company discontinued its Phase 3 clinical trial for Impracor (see Note 7). Due to certain contractual guarantees
related to these prepaid expenses, the Company expects to be reimbursed for these prepayments.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">The following table summarizes information about stock options
outstanding and exercisable at September 30, 2013:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: -0.75in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="2" style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options Outstanding</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Options Exercisable</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Weighted</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Average</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Weighted</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Weighted</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Remaining</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Average</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Average</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Range of</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Number</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Contractual</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Exercise</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Number</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Exercise</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Exercise Prices</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Outstanding</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Life in Years</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Price</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Exercisable</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Price</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 1%; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 18%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2.40-3.20</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">250,000</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.82</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2.80</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">250,000</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="width: 13%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">2.80</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">3.60 - $4.50</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">565,568</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">3.50</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4.10</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">495,362</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4.12</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">6.00 - $9.00</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">423,103</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">8.78</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">8.01</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">59,662</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">8.37</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">10.75</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">7,603</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4.21</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">10.75</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5,702</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">10.75</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">28.00 - $80.00</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">7,180</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">6.32</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">40.18</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">7,180</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">40.18</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">1,253,454</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.77</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">5.41</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">817,906</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif; color: black">4.39</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="margin: 0pt"></p>
50066
5000000
2012-04-25
2012-04-25
2013-02-07
2013-02-28
2013-07-19
2015-04-25
2015-04-25
2018-07-02
2016-02-28
2018-07-19
2014-02-28
2016-09-30
3874
556872
821050
269860
-5682
7.66
5.94
5.97
176.00
4.51
10300
120000
1384325
-166865
319786
(1) Subsequent to the period ended September 30, 2013, the Company discontinued its Phase 3 clinical trial for Impracor (see Note 7). Due to certain contractual guarantees related to these prepaid expenses, the Company expects to be reimbursed for these prepayments.