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2019-04-30
0001360214
us-gaap:LondonInterbankOfferedRateLIBORMember
2019-04-01
2019-04-30
0001360214
HROW:CapitalLeaseMember
2018-12-31
0001360214
HROW:OperatingLeaseMember
2018-12-31
iso4217:USD
xbrli:shares
iso4217:USD
xbrli:shares
xbrli:pure
HROW:Segment
utr:sqft
HARROW HEALTH, INC.
10-K
2019-12-31
false
--12-31
Accelerated Filer
50000000
50000000
90000000
209000
4000
28000
201000
1000
235000
48000
5000
151000
1000
4000
2000
1789000
1317000
1149000
21000
2486000
889000
879000
26000
0.001
0.001
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s intangible assets at December
31, 2019 consisted of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">Amortization</font></td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Net</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">periods</font></td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Accumulated</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Carrying</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">(in years)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Cost</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">amortization</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Impairment</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">value</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 36%"><font style="font-size: 10pt">Patents</font></td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: center"><font style="font-size: 10pt">17-19 years</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">1,102</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">(97</font></td>
<td style="width: 1%"><font style="font-size: 10pt">)</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">(259</font></td>
<td style="width: 1%"><font style="font-size: 10pt">)</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">746</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Licenses</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">20 years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">50</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(5</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">45</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Trademarks</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">Indefinite</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">340</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">340</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Customer relationships</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">3-15 years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(1,165</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(630</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,205</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Trade name</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">5 years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">16</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(14</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(2</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Non-competition clause</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">3-4 years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">294</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(274</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(20</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">State pharmacy licenses</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 10pt">25 years</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">45</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(9</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(35</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">4,847</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(1,564</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(946</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,337</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Amortization expense for intangible assets
for the year ended December 31 was as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 42%"><font style="font-size: 10pt">Patents</font></td>
<td style="width: 2%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 25%; text-align: right"><font style="font-size: 10pt">48</font></td>
<td style="width: 1%"> </td>
<td style="width: 2%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 25%; text-align: right"><font style="font-size: 10pt">28</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Licenses</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Customer relationships</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">151</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">201</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Trade name</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">4</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Non-competition clause</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">State pharmacy licenses</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">209</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">235</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Estimated future amortization expense for the
Company’s intangible assets at December 31, 2019 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 82%; padding-bottom: 1.5pt"><font style="font-size: 10pt"><u>Years ending December 31,</u></font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%"> </td>
<td style="width: 15%"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2020</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">187</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">187</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2022</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">187</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2023</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">187</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2024</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">159</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Thereafter</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,430</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,337</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
17000
495000
520000
25526931
24339610
25526931
24339610
0001360214
FY
59085000
49451000
19749000
15989000
7453000
36767000
32843000
19699000
15942000
7440000
59085000
49451000
19749000
15989000
7453000
-4803000
1370000
8245000
716000
-5217000
4000000
4169000
800000
800000
1259000
168000
-1370000
14625000
-4000000
-4169000
4947000
3747000
3747000
3968000
3968000
846000
44000
118000
50000
50000
50000
561000
64000
103000
33000
40000
0
P5Y8M19D
P10Y
P5Y
2482009
2656683
362000
102275
1603530
2558998
5.09
5.31
6.19
3.56
4.67
5.31
2.05
3.96
6.15
8.01
42.80
5.26
P5Y1M6D
7011000
5552000
6911000
2.20
1.42
3.72
6.43
P5Y9M7D
P6Y1M9D
P5Y26D
P7Y
0.76
0.64
1.26
0.78
0.0205
0.0183
0.0300
0.0268
1.47
1.47
3.04
5.49
6.64
1.70
1.70
42.80
2.60
4.50
6.36
8.99
42.80
4.17
3.20
2656683
781940
458622
440350
970741
5030
P5Y18D
P6Y7M28D
P6Y1M2D
P7Y10M28D
P1Y11M26D
P7M13D
1603530
619016
440124
178619
360741
5030
4.57
2.10
3.98
6.08
8.24
42.80
2206973
1418587
8000
2015-05-11
2016-08-16
2017-07-19
125000
40000
615386
780386
1.79
1.79
3.08
2.08
1.79
3.75
2.08
2.12
1.79
1.79
2023000
2251000
235000
150000
2636000
1464000
300000
259000
2019
Under the terms of the Klarity License Agreement, the Company is required to make royalty payments to Dr. Lindstrom ranging from 3% to 6% of net sales, dependent upon the final formulation of the Klarity Product sold.
The Company is required to make royalty payments to Dr. Lindstrom ranging from 2% to 3% of net sales, dependent upon the final formulation and patent protection of the Lindstrom Product sold.
The Company is required to make royalty payments to Dr. Lindstrom ranging from 2% to 4% of net sales, dependent upon the final formulation and patent protection of the Presbyopia Product sold.
1772000
2529000
1772000
27711000
24751000
19584000
15370000
5797000
34416000
24851000
34416000
16749000
16521000
16749000
2083000
825000
1006000
361000
33096000
29243000
24468000
174000
4678000
19842000
-2500000
-2728000
512000
613000
-166000
1074000
1342000
2365000
388000
471000
123000
2271000
-415000
95000
384000
-1833000
-2199000
1468000
1768000
-1006000
4131000
642000
6000
53000
4949000
6838000
200000
200000
4749000
6638000
1967000
2097000
17000
4000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The unaudited condensed results of operations information of Surface
is summarized below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Revenues, net</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 42%; padding-bottom: 1.5pt"><font style="font-size: 10pt">Loss from operations</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; width: 1%"> </td>
<td style="border-bottom: black 1.5pt solid; width: 26%; text-align: right"><font style="font-size: 10pt">4,000</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; width: 1%"> </td>
<td style="border-bottom: black 1.5pt solid; width: 26%; text-align: right"><font style="font-size: 10pt">1,370</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Net loss</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(4,000</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(1,370</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The unaudited condensed results of operations information of Melt
is summarized below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>For the</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>Year Ended</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2019</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Revenues, net</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 61%; padding-bottom: 1.5pt"><font style="font-size: 10pt">Loss from operations</font></td>
<td style="width: 3%; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; width: 1%"> </td>
<td style="border-bottom: black 1.5pt solid; width: 34%; text-align: right"><font style="font-size: 10pt">4,169</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Net loss</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(4,169</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The unaudited condensed balance sheet information
of Surface is summarized below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">At December 31,</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">At December 31,</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">Current assets</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">15,942</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">19,699</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Non current assets</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">47</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">50</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Total assets</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">15,989</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">19,749</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total liabilities</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">619</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">165</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Total stockholders equity</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">15,370</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">19,584</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Total liabilities and stockholders’ equity</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">15,989</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">19,749</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The unaudited condensed balance sheet information
of Melt is summarized below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2019</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 67%"><font style="font-size: 10pt">Current assets</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 30%; text-align: right"><font style="font-size: 10pt">7,440</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Non current  assets</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">13</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total assets</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,453</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total liabilities</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">1,656</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Total preferred stock and stockholders’ equity</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5,797</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total liabilities and stockholders’ equity</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,453</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"><b>NOTE 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Basis of Presentation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Harrow has prepared the accompanying consolidated
financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). The
accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, as well as
Mayfield and Stowe, 70% majority controlled subsidiaries of Harrow as of December 31, 2019. The remaining 30% of Mayfield is owned
by Elle Pharmaceutical, LLC (“Elle”), TGV-Health, LLC and its affiliated entities (collectively “TGV”)
or other consultants. Mayfield was organized to develop women’s health-focused drug candidates. The remaining 30% of Stowe
is owned by TGV. Stowe was organized to develop ophthalmic drug candidates. All inter-company accounts and transactions have been
eliminated in consolidation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Harrow consolidates entities in which we have
a controlling financial interest. We consolidate subsidiaries in which we hold and/or control, directly or indirectly, more than
50% of the voting rights. All intercompany accounts and transactions have been eliminated in consolidation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Use of Estimates</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of financial statements in
conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and
expenses during the reporting periods. Significant estimates made by management are, among others, allowance for doubtful accounts
and contractual adjustments, renewal periods and discount rates for leases, realizability of inventories, valuation of investments
in equity securities, deferred taxes, goodwill and intangible assets, recoverability of long-lived assets and goodwill, valuation
of contingent acquisition obligations and deferred acquisition obligations, valuation of notes payable, and valuation of stock-based
transactions with employees and non-employees. Actual results could differ from those estimates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Liquidity</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">While there is no assurance, the Company believes
cash generated from its operations, along with its existing cash resources, restricted cash and marketable securities of approximately
$30,149 at December 31, 2019, will be sufficient to sustain the Company’s planned level of operations for at least the next
twelve months. However, estimates of operating expenses and working capital requirements could be incorrect, and the Company could
use its cash resources faster than anticipated. Further, some or all of the ongoing or planned activities may not be successful
and could result in further losses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company may seek to increase liquidity
and capital resources by one or more of the following which may include, but are not limited to: the sale of assets and/or businesses,
obtaining financing through the issuance of equity, debt, or convertible securities; and working to increase revenue growth through
sales. There is no guarantee that the Company will be able to obtain capital when needed on terms it deems as acceptable, or at
all.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Segments</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s chief operating decision-maker
is its Chief Executive Officer who makes resource allocation decisions and assesses performance based on financial information
presented on as operating segments. The Company has identified two operating segments as reportable segments. See Note 18 for more
information regarding the Company’s reportable segments.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Noncontrolling Interests</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 recognizes any noncontrolling interest
as a separate line item in equity in the consolidated financial statements. A noncontrolling interest represents the portion of
equity ownership in a less-than-wholly owned subsidiary not attributable to the Company. Generally, any interest that holds less
than 50% of the outstanding voting shares is deemed to be a noncontrolling interest; however, there are other factors, such as
decision-making rights, that are considered as well. The Company includes the amount of net income (loss) attributable to noncontrolling
interests in consolidated net income (loss) on the face of the consolidated statements of operations.</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 provides in the consolidated statements
of stockholders’ equity a reconciliation at the beginning and the end of the period of the carrying amount of total equity,
equity attributable to the parent, and equity attributable to the noncontrolling interest that separately discloses:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 24px"> </td>
<td style="width: 24px"><font style="font-size: 10pt">(1)</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">net income or loss;</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">(2)</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners; and</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">(3)</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">each component of other income or loss.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Revenue Recognition and Deferred Revenue</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes revenue at the time
of transfer of promised goods to customers in an amount that reflects the consideration to which the Company expects to be entitled
in exchange for those goods or services (see Note 3).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Cost of Sales</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cost of sales includes direct and indirect
costs to manufacture formulations and other products sold, including active pharmaceutical ingredients, personnel costs, packaging,
storage, royalties, shipping and handling costs and the write-off of obsolete inventory.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Research and Development</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company expenses all costs related to research
and development as they are incurred. Research and development expenses consist of expenses incurred in performing research and
development activities, including salaries and benefits, other overhead expenses, and costs related to clinical trials, contract
services and outsourced contracts.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Debt Issuance Costs and Debt Discount</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Debt issuance costs and the debt discount are
recorded net of notes payable and finance lease obligations in the consolidated balance sheets. Amortization expense of debt issuance
costs and the debt discount is calculated using the effective interest method over the term of the debt and is recorded in interest
expense in the accompanying consolidated statements of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Intellectual Property</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The costs of acquiring intellectual property
rights to be used in the research and development process, including licensing fees and milestone payments, are charged to research
and development expense as incurred in situations where the Company has not identified an alternative future use for the acquired
rights, and are capitalized in situations where we have identified an alternative future use for the acquired rights. Patents and
trademarks are recorded at cost and capitalized at a time when the future economic benefits of such patents and trademarks become
more certain (see “—Goodwill and Intangible Assets” below). The Company began capitalizing certain costs associated
with acquiring intellectual property rights during 2015; if costs are not capitalized they are expensed as incurred.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Income Taxes</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As part of the process of preparing the Company’s
consolidated financial statements, the Company must estimate the actual current tax liabilities and assess permanent and temporary
differences that result from differing treatment of items for tax and accounting purposes. The temporary differences result in
deferred tax assets and liabilities, which are included within the consolidated balance sheets. The Company must assess the likelihood
that the deferred tax assets will be recovered from future taxable income and, to the extent the Company believes that recovery
is not more likely than not, a valuation allowance must be established which reduces the amount of deferred tax assets recorded
on the consolidated balance sheets. To the extent the Company establishes a valuation allowance or increase or decrease this allowance
in a period, the impact will be included in income tax expense in the consolidated statement of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for income taxes under
the provisions of Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”)
740, <i>Income Taxes</i>. As of December 31, 2019 and 2018, there were no unrecognized tax benefits included in the consolidated
balance sheets that would, if recognized, affect the effective tax rate. The Company’s practice is to recognize interest
and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties in its
consolidated balance sheets at December 31, 2019 and 2018, and has not recognized interest and/or penalties in the consolidated
statements of operations for the years ended December 31, 2019 and 2018. The Company is subject to taxation in the United States,
California, Florida, Georgia, Illinois, New Jersey, New York, Tennessee, and Wisconsin. The Company’s tax years since 2000
may be subject to examination by the federal and state tax authorities due to the carryforward of unutilized net operating losses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Cash and Cash Equivalents</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cash equivalents include short-term, highly
liquid investments with maturities of three months or less at the time of acquisition.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Concentrations of Credit Risk</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company places its cash with financial
institutions deemed by management to be of high credit quality. The Federal Deposit Insurance Corporation (“FDIC”)
provides basic deposit coverage with limits up to $250 per owner. From time to time the Company has cash deposits in excess of
FDIC limits.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Investment in Eton Pharmaceuticals, Inc.
</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2017, the Company formed Eton as a
wholly owned subsidiary. In June 2017 the Company lost voting and ownership control of Eton and it ceased consolidating Eton’s
financial statements. At the time of deconsolidation, the Company recorded a gain of $5,725 and adjusted the carrying value in
Eton to reflect the increased valuation of Eton and the Company’s new ownership percent in accordance with ASC 810-10-40-4(c),
<i>Consolidation</i>. At the time of deconsolidation, the Company used the equity method of accounting as management determined
that the Company had the ability to exercise significant influence over the operating and financial decisions of Eton. Under this
method, the Company recognized earnings and losses of Eton in its consolidated financial statements and adjusted the carrying amount
of its investment in Eton accordingly. During the years ended December 31, 2019 and 2018, the Company recorded equity in net loss
of Eton of $0 and $3,507, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In November 2018, Eton closed on an initial
public offering of 4,140,000 shares of its common stock at $6.00 per share for gross proceeds of approximately $24,800 (the “Eton
IPO”). Following the close of the Eton IPO, the Company estimated its common stock position in Eton equaled 19.98% of the
equity and voting interests issued and outstanding of Eton, and it ceased using the equity method of accounting for its investment
in Eton. The Company recognizes earnings and losses of Eton in its consolidated financial statements based on the fair market value
of the shares owned and adjust the carrying amount of the Company’s investment in Eton accordingly. Eton’s common stock
currently trades on the NASDAQ Global Market exchange. At December 31, 2019, the fair market value of Eton’s common stock
was $7.20 per share, the closing share price of Eton common stock on that day. In accordance with Accounting Standards Update (“ASU”)
2016-01, <i>Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities</i>,
for the year ended December 31, 2019, the Company recorded an investment gain from its Eton common stock position of $3,780 related
to the change in fair market value of the Company’s investment in Eton during the measurement period. For the year ended
December 31, 2018, the Company recorded an investment gain from its Eton common stock position of $21,420 related to the change
in fair market value of the Company’s investment in Eton during the measurement period. As of December 31, 2019, the fair
market value of the Company’s investment in Eton was $25,200.</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">Eton and the Company signed licensing agreements
for two products developed by the Company whereby the Company assigned the product rights to Eton. Eton would pay the Company a
$50 milestone payment upon patent issuance for each product and a royalty fee at a rate of six percent on the net sales of those
two products. On December 26, 2017, one of the products had its patent issued and a $50 milestone fee was received by the Company
in January 2018. In July 2018, Eton and the Company agreed to cancel the licensing agreement for one of the products and retain
the product rights at the Company, in exchange of the Company paying Eton $50.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 6, 2019, the Company entered into an
Asset Purchase Agreement (the “CT-100 Asset Purchase Agreement”) with Eton. Pursuant to the CT-100 Asset Purchase Agreement,
Eton sold all of its right, title and interest in CT-100 back to the Company. Pursuant to the CT-100 Asset Purchase Agreement,
the Company will make certain payments to Eton upon the achievement of certain development and commercial milestones. In addition,
the Company is required to pay Eton a royalty in the low-single digit percentage range worldwide on a country-by-country basis
on net sales for a period of the longer of 15 years from the date of the first commercial sale of a product subject to certain
conditions.</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">Mark L. Baum, the Company’s Chief Executive
Officer is a member of the Eton board of directors.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Accounts Receivable</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts receivable are stated net of allowances
for doubtful accounts and contractual adjustments. The accounts receivable balance primarily includes amounts due from customers
the Company has invoiced or from third-party providers (e.g., insurance companies and governmental agencies), but for which payment
has not been received. Charges to bad debt are based on both historical write-offs and specifically identified receivables. Accounts
receivable are presented net of allowances for doubtful accounts and contractual adjustments in the amount of $76 and $270 as of
December 31, 2019 and 2018, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Inventories</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories are stated at the lower of cost
or net realizable value. Cost is determined on a first-in, first-out basis. The Company evaluates the carrying value of inventories
on a regular basis, based on the price expected to be obtained for products in their respective markets compared with historical
cost. Write-downs of inventories are considered to be permanent reductions in the cost basis of inventories.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company also regularly evaluates its inventories
for excess quantities and obsolescence (expiration), taking into account such factors as historical and anticipated future sales
or use in production compared to quantities on hand and the remaining shelf life of products and active pharmaceutical ingredients
on hand. The Company establishes reserves for excess and obsolete inventories as required based on its analyses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Investment in Melt Pharmaceuticals, Inc.</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2018, the Company formed Melt as a
wholly owned subsidiary. In January and March of 2019, Melt entered into definitive stock purchase agreements (collectively, the
“Melt Series A Preferred Stock Agreement”) with certain investors and closed on the purchase and sale of Melt’s
Series A Preferred Stock (the “Melt Series A Stock”), totaling approximately $11,400 of proceeds (collectively the
“Melt Series A Round”) at a purchase price of $5.00 per share. As a result, the Company lost voting and ownership control
of Melt and ceased consolidating Melt’s financial statements. In connection with the Melt Series A Preferred Stock Agreement,
Melt also entered into a Registration Rights Agreement and agreed to use commercially reasonable efforts to file, or confidentially
submit, a registration statement on Form S-1 with the United States Securities and Exchange Commission by September 30, 2020 relating
to an initial public offering of its common stock.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At the time of deconsolidation, the Company
recorded a gain of $5,810 and adjusted the carrying value in Melt to reflect the increased valuation of Melt and the Company’s
new ownership interest in accordance with ASC 810-10-40-4(c), <i>Consolidation</i>.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company owns 3,500,000 common shares (which
is approximately 44% of the equity interest as of December 31, 2019) of Melt and uses the equity method of accounting for this
investment, as management has determined that the Company has the ability to exercise significant influence over the operating
and financial decisions of Melt. Under this method, the Company recognizes earnings and losses of Melt in its consolidated financial
statements and adjusts the carrying amount of its investment in Melt accordingly. The Company’s share of earnings and losses
are based on the Company’s ownership interest of Melt. Any intra-entity profits and losses are eliminated. During the year
ended December 31, 2019, the Company recorded equity in net loss of Melt of $1,842. As of December 31, 2019, the carrying value
of the Company’s investment in Melt was $3,968.</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">See Note 4 for more information and related
party disclosure regarding Melt.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Investment in Surface Pharmaceuticals, Inc.</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2017, the Company formed Surface as
a wholly owned subsidiary. In May and July 2018, Surface entered into and closed on definitive stock purchase agreements with an
institutional investor for the purchase of Surface’s Series A Preferred Stock (the “Surface Series A Stock”)
that resulted in total proceeds to Surface of approximately $21,000. At the time of the first closing in May 2018, the Company
lost voting and ownership control of Surface and it ceased consolidating Surface’s financial statements. The Surface Series
A Stock (i) was issued at a purchase price of $3.30 per share; (ii) will vote together with the common stock and all other shares
of stock of Surface having general voting power; (iii) will be entitled to the number of votes equal to the number of shares of
preferred stock held; (iv) will hold liquidation preference over all other equity interests in Surface; and (v) will have mandatory
conversion requirements into Surface common stock upon events including an underwritten initial public offering of Surface common
stock or similar transaction.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At the time of deconsolidation, the Company
recorded a gain of $5,320 and adjusted the carrying value in Surface to reflect the increased valuation of Surface and the Company’s
new ownership percent in accordance with ASC 810-10-40-4(c).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company owns 3,500,000 common shares (which
is approximately 30% of the equity interest as of December 31, 2019, and calculated after the second closing of the sale Series
A Preferred Stock in July 2018) of Surface and uses the equity method of accounting for this investment, as management has determined
that the Company has the ability to exercise significant influence over the operating and financial decisions of Surface. Under
this method, the Company recognizes earnings and losses of Surface in its consolidated financial statements and adjusts the carrying
amount of its investment in Surface accordingly. The Company’s share of earnings and losses are based on the shares of common
stock and in-substance common stock of Surface held by the Company. Any intra-entity profits and losses are eliminated. During
the years ended December 31, 2019 and 2018, the Company recorded equity in net loss of Surface of $1,200 and $373, respectively.
As of December 31, 2019, the carrying value of the Company’s investment in Surface was $3,747.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">See Note 5 for more information and related
party disclosure regarding Surface.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Property, Plant and Equipment</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property, plant and equipment is stated at
cost less accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-line method
over the estimated useful life of the asset. Leasehold improvements and capital lease equipment are amortized over the estimated
useful life or remaining lease term, whichever is shorter. Computer software and hardware and furniture and equipment are depreciated
over three to five years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Business Combinations</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for business combinations
by recognizing the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair
values on the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions,
especially with respect to intangible assets, estimated contingent consideration payments and pre-acquisition contingencies. Examples
of critical estimates in valuing certain of the intangible assets the Company has acquired or may acquire in the future include
but are not limited to:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 24px"> </td>
<td style="width: 24px"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">future expected cash flows from product sales, support agreements, consulting contracts, other customer contracts, and acquired developed technologies and patents; and</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td><font style="font-size: 10pt">discount rates utilized in valuation estimates.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Unanticipated events and circumstances may
occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Additionally, any change in the
fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes from events
after the acquisition date, such as changes in our estimates of relevant revenue or other targets, will be recognized in earnings
in the period of the estimated fair value change. A change in fair value of the acquisition-related contingent consideration or
the occurrence of events that cause results to differ from our estimates or assumptions could have a material effect on the consolidated
financial position, statements of operations or cash flows in the period of the change in the estimate.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Goodwill and Intangible Assets</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Patents and trademarks are recorded at cost
and capitalized at a time when the future economic benefits of such patents and trademarks become more certain. At that time, the
Company capitalizes third-party legal costs and filing fees associated with obtaining and prosecuting claims related to its patents
and trademarks. Once the patents have been issued, the Company amortizes these costs over the shorter of the legal life of the
patent or its estimated economic life, generally 20 years, using the straight-line method. Trademarks are an indefinite life intangible
asset and are assessed for impairment based on future projected cash flows as further described below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company reviews its goodwill and indefinite-lived
intangible assets for impairment as of January 1 of each year and when an event or a change in circumstances indicates the fair
value of a reporting unit may be below its carrying amount. Events or changes in circumstances considered as impairment indicators
include but are not limited to the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 48px"> </td>
<td style="width: 24px"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">significant underperformance of the Company’s business relative to expected operating results;</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">significant adverse economic and industry trends;</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">significant decline in the Company’s market capitalization for an extended period of time relative to net book value; and</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">expectations that a reporting unit will be sold or otherwise disposed.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-indent: -0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The goodwill impairment test consists of a two-step process as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Step 1. The Company compares the fair value
of each reporting unit to its carrying amount, including the existing goodwill. The fair value of each reporting unit is determined
using a discounted cash flow valuation analysis. The carrying amount of each reporting unit is determined by specifically identifying
and allocating the assets and liabilities to each reporting unit based on headcount, relative revenues or other methods as deemed
appropriate by management. If the carrying amount of a reporting unit exceeds its fair value, an indication exists that the reporting
unit’s goodwill may be impaired and the Company then performs the second step of the impairment test. If the fair value of
a reporting unit exceeds its carrying amount, no further analysis is required.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Step 2. If further analysis is required, the
Company compares the implied fair value of the reporting unit’s goodwill, determined by allocating the reporting unit’s
fair value to all of its assets and its liabilities in a manner similar to a purchase price allocation, to its carrying amount.
If the carrying amount of the reporting unit’s goodwill exceeds its fair value, an impairment loss will be recognized in
an amount equal to the excess.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Impairment of Long-Lived Assets</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Long-lived assets, such as property, plant
and equipment, purchased intangibles subject to amortization and patents and trademarks, are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected
to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge
is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed
of would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value
less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would
be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material (See Note
9).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Park Restructuring</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2019, the Company’s subsidiary,
Park Compounding, Inc. (“Park”), and Noice Rx, LLC (“Noice”) terminated an Asset Purchase Agreement dated
July 26, 2019 (the “Park Purchase Agreement”), between the parties. Under the terms of the Park Purchase Agreement,
Park had agreed to sell substantially all its assets associated with its non-ophthalmology pharmaceutical compounding business
to Noice, including its pharmacy facility and equipment located in Irvine, California. The closing of the sale transaction was
dependent on the California State Board of Pharmacy approving of the sale and issuing a temporary pharmacy and sterile license
permit to Noice, which did not occur and led to Park ceasing operations at the close of business on August 27, 2019. As a result,
the Company restructured its Park business, ceased operations at its Irvine, California-based pharmacy, and facilitated the transition
of certain compounded formulations and related equipment from Park to the Company’s New Jersey-based compounded pharmaceutical
production facilities (the “Park Restructuring”). As a result of the Park Restructuring, the Company incurred non-cash
impairment costs of approximately $3,781 related to assets held at Park, primarily associated with property, plant, equipment,
inventory, goodwill and other intangible assets, and $480 in one-time costs related to severance packages and other costs associated
with the Park Restructuring during the year ended December 31, 2019.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has reduced the Park compounded
product formulary to seven base formulations, based on factors including unit order volumes, revenues and gross margin percentages,
and ImprimisRx expects to have re-acquired approximately half of Park’s historical revenues during the first quarter of 2020.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Fair Value Measurements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Fair value measurements are determined based
on the assumptions that market participants would use in pricing an asset or liability. GAAP establishes a hierarchy for inputs
used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring
that the most observable inputs be used when available. The established fair value hierarchy prioritizes the use of inputs used
in valuation methodologies into the following three levels:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 24px"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Level 1: Applies to assets or liabilities for which there are quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Level 2: Applies to assets or liabilities for which there are significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Level 3: Applies to assets or liabilities for which there are significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. For example, Level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2019 and 2018, the Company
measured its investment in Eton on a recurring basis. The Company’s investment in Eton is classified as Level 1 as the fair
value is determined using quoted market prices in active markets for the same securities. As of December 31, 2019, the fair market
value of the Company’s investment in Eton was $25,200.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s financial instruments included
cash and cash equivalents, investment in Eton, accounts receivable, accounts payable and accrued expenses, accrued payroll and
related liabilities, deferred revenue and customer deposits, notes payable and operating and finance leases. The carrying amount
of these financial instruments, except for notes payable and finance leases, approximates fair value due to the short-term maturities
of these instruments. The Company’s restricted short-term investments are carried at amortized cost, which approximates fair
value. Based on borrowing rates currently available to the Company, the carrying values of the notes payable and operating and
finance leases approximate their respective fair values.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Stock-Based Compensation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">All stock-based payments to employees, directors
and consultants, including grants of stock options, warrants, restricted stock units (“RSUs”) and restricted stock,
are recognized in the consolidated financial statements based upon their estimated fair values. The Company uses the Black-Scholes-Merton
option pricing model and Monte Carlo Simulation to estimate the fair value of stock-based awards. The estimated fair value is determined
at the date of grant. The financial statement effect of forfeitures is estimated at the time of grant and revised, if necessary,
if the actual effect differs from those estimates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Basic and Diluted Net Income per Common
Share</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic net income per common share is computed
by dividing income attributable to common stockholders for the period by the weighted average number of common shares outstanding
during the period. Diluted income per share is computed by dividing the income attributable to common stockholders for the period
by the weighted average number of common and common equivalent shares, such as stock options and warrants, outstanding during the
period.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic and diluted net income 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 stock options, unvested restricted stock units (“RSUs”) and
warrants were 4,848,459 and 6,201,355 at December 31, 2019 and 2018, respectively, and are excluded in the calculation of diluted
net income per share for the periods presented, because the effect is anti-dilutive for that time period. Included in the basic
and diluted net income per share calculation were RSUs awarded to directors that had vested, but the issuance and delivery of the
shares are deferred until the director resigns. The number of shares underlying vested RSUs at December 31, 2019 and 2018 was 324,303
and 236,693, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows the computation of
basic net income per share of common stock for the years ended December 31, 2019 and 2018:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td>
<td> </td>
<td colspan="2" style="text-align: right"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 50%; padding-bottom: 2.5pt"><font style="font-size: 10pt">Numerator – net income</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double; width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; width: 22%; text-align: right"><font style="font-size: 10pt">168</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double; width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; width: 22%; text-align: right"><font style="font-size: 10pt">14,625</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Denominator – weighted average number of shares outstanding, basic</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">25,323,159</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">21,917,570</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Net income per share, basic</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.01</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.67</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the years end December 31, 2019 and 2018,
the Company computed diluted net income per share using the weighted-average number of common shares and dilutive common equivalent
shares outstanding during that period. Diluted common equivalent shares for the years ended December 31, 2019 and 2018, respectively,consisted
of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Shares</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Shares</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 62%"><font style="font-size: 10pt">Diluted shares related to:</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">25,323,159</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">21,917,570</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Warrants</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">488,498</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,844,272</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Stock options</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">654,441</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">50,203</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Dilutive common equivalent shares</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">26,466,098</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">23,812,045</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows the computation of
diluted net income per share using the weighted-average number of common shares and dilutive common equivalent shares outstanding
for the years ended December 31, 2019 and 2018:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td>
<td> </td>
<td colspan="2" style="text-align: right"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; padding-bottom: 2.5pt"><font style="font-size: 10pt">Numerator – net income</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double; width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; width: 18%; text-align: right"><font style="font-size: 10pt">168</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double; width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; width: 18%; text-align: right"><font style="font-size: 10pt">14,625</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Weighted average number of shares outstanding, basic</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">25,323,159</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">21,917,570</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Dilutive common equivalents</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,142,939</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,894,475</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Denominator – number of shares used for diluted earnings per share computation</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">26,466,098</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">23,812,045</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Net income per share, diluted</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.01</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.61</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Recently Adopted Accounting Pronouncements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2016, the FASB issued new lease
accounting guidance in ASU 2016-02, <i>Leases</i> (Topic 842). This new guidance was initiated as a joint project with the International
Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of financial information for
users. This new guidance would eliminate the concept of off-balance sheet treatment for “operating leases” for lessees
for the vast majority of lease contracts. Under ASU 2016-02, at inception, a lessee must classify all leases with a term of over
one year as either finance or operating, with both classifications resulting in the recognition of a defined “right-of-use”
asset and a lease liability on the balance sheet. However, recognition in the income statement will differ depending on the lease
classification, with finance leases recognizing the amortization of the right-of-use asset separate from the interest on the lease
liability and operating leases recognizing a single total lease expense. Lessor accounting under ASU 2016-02 is substantially unchanged
from the previous lease requirements under GAAP. ASU 2016-02 took effect for public companies in fiscal years beginning after December
15, 2018, including interim periods within those fiscal years. On January 1, 2019, the Company adopted Topic 842 using the modified
retrospective transition method with no impact to stockholders’ equity. As of December 31, 2019, the Company held on its
consolidated balance sheet $6,559 for the right-of-use asset and $6,967 for the related lease liability related to operating and
finance leases. The difference between the right of use asset and related lease liability is predominantly deferred rent and other
related lease expenses under the new lease accounting standard. For additional information regarding how the Company is accounting
for leases under Topic 842, refer to Note 13.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Recently Issued Accounting Pronouncements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In June 2016, the FASB issued ASU 2016-13,
<i>Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments</i>, which requires the measurement
and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred
loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses.
The Company will adopt the new standard effective January 1, 2020 and does not expect the adoption of this guidance to have a material
impact on its consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2017, the FASB issued ASU 2017-04,
<i>Intangibles-Goodwill and Other</i>. This guidance simplifies the accounting for goodwill impairment for all entities by requiring
impairment charges to be based on the first step in the current two-step impairment test under ASC 350. The updated standard eliminates
the requirement to calculate a goodwill impairment charge using Step 2. If a reporting unit’s carrying amount exceeds its
fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount
of goodwill allocated to that reporting unit. ASU 2017-04 is effective for reporting periods beginning after December 31, 2019
on a prospective basis, and early adoption is permitted. The Company does not expect ASU 2017-04 to have a material effect on the
Company’s financial position, results of operations and cash flows.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2018, the FASB issued ASU 2018-13,
<i>Changes to Disclosure Requirements for Fair Value Measurements</i>, which improved the effectiveness of disclosure requirements
for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements.
The Company will adopt the new standard effective January 1, 2020 and does not expect the adoption of this guidance to have a material
impact on its consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2019, the FASB issued ASU 2019-12,
<i>Income Taxes</i>: <i>Simplifying the Accounting for Income Taxes</i> , which simplifies the accounting for income taxes. This
guidance will be effective for the Company in the first quarter of 2021 on a prospective basis, and early adoption is permitted.
The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 3. REVENUES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 1, 2018, the Company adopted ASU
2014-09, using the modified retrospective transition method. There was no effect for any adjustments to retained earnings upon
adoption of the standard on January 1, 2018. The Company has two primary streams of revenue: (1) revenue recognized from our sale
of products within our pharmacy services and (2) revenue recognized from intellectual property license and asset purchase agreements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Product Revenues from Pharmacy Services</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company sells prescription drugs directly
through our pharmacy and outsourcing facility network. Revenue from our pharmacy services divisions includes: (i) the portion of
the price the client pays directly to us, net of any volume-related or other discounts paid back to the client, (ii) the price
paid to us by individuals, and (iii) customer copayments made directly to the pharmacy network. Sales taxes are not included in
revenue. Following the core principle of ASU 2014-09, we have identified the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 24px"><font style="font-size: 10pt">1.</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Identify the contract(s) with a customer: A contract exists with a customer at the time the prescription or order is received by the Company.</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font-size: 10pt">2.</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Identify the performance obligations in the contract: The order received contains the performance obligations to be met, in almost all cases the product the customer is wishing to receive. If we are unable to be meet the performance obligation the customer is notified.</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font-size: 10pt">3.</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Determine the transaction price: the transaction price is based on the product being sold to the customer, and any related customer discounts. These amounts are pre-determined and built into our order management software.</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font-size: 10pt">4.</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Allocate the transaction price to the performance obligations in the contract: The transaction price associated with the product(s) being ordered is allocated according to the pre-determined amounts.</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font-size: 10pt">5.</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Recognize revenue when (or as) the entity satisfies a performance obligation: At the time of shipment from the pharmacy or outsourcing facility the performance obligation has been met.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-indent: -0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following revenue recognition policy has been established for
the pharmacy services division:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenues generated from prescription or office
use drugs sold by our pharmacies and outsourcing facility are recognized when the prescription is shipped. At the time of shipment,
the pharmacy services division has performed substantially all of its obligations under its client contracts and does not experience
a significant level of returns or reshipments. Determination of criteria (3) and (4) is based on management’s judgments regarding
the fixed nature of the selling prices of the products delivered and the collectability of those amounts. The Company records reductions
to revenue for discounts at the time of the initial sale. Estimated returns and allowances and other adjustments are provided for
in the same period during which the related sales are recorded and are based on actual returns history. The rate of returns is
analyzed annually to determine historical returns experience. If the historical data we use to calculate these estimates do not
properly reflect future returns, then a change in the allowance would be made in the period in which such a determination is made
and revenues in that period could be materially affected. The Company will defer any revenues received for a product that has not
been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has
been delivered and no refund will be required.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Intellectual Property License Revenues</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company currently holds four intellectual
property license and related agreements in which the Company has promised to grant a license or sale which provides a customer
with the right to access the Company’s intellectual property. License arrangements may consist of non-refundable upfront
license fees, data transfer fees, research reimbursement payments, exclusive license rights to patented or patent pending compounds,
technology access fees, and various performance or sales milestones. These arrangements can be multiple-element arrangements, the
revenue of which is recognized at the point of time the performance obligation is met.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Non-refundable fees that are not contingent
on any future performance by the Company and require no consequential continuing involvement on the part of the Company are recognized
as revenue when the license term commences and the licensed data, technology, compounded drug preparation and/or other deliverable
is delivered. Such deliverables may include physical quantities of compounded drug preparations, design of the compounded drug
preparations and structure-activity relationships, the conceptual framework and mechanism of action, and rights to the patents
or patent applications for such compounded drug preparations. The Company defers recognition of non-refundable fees if it has continuing
performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable
fee has no utility to the licensee and that are separate and independent of the Company’s performance under the other elements
of the arrangement. In addition, if the Company’s continued involvement is required, through research and development services
that are related to its proprietary know-how and expertise of the delivered technology or can only be performed by the Company,
then such non-refundable fees are deferred and recognized over the period of continuing involvement. Guaranteed minimum annual
royalties are recognized on a straight-line basis over the applicable term.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenue disaggregated by revenue source for
the years ended December 31, 2019 and 2018, consists of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 10pt"><b>For the year ended</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2019</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 62%"><font style="font-size: 10pt"><b>Product sales, net</b></font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">51,137</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">41,334</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt"><b>License revenues</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">28</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">38</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt"><b>Total revenues</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">51,165</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">41,372</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred revenue and customer deposits at
December 31, 2019 and 2018, were $57 and $119, respectively. All deferred revenue and customer deposit amounts at December 31,
2018 were recognized as revenue during the year ended December 31, 2019.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 5. INVESTMENT IN SURFACE PHARMACEUTICALS,
INC. AND AGREEMENTS - RELATED PARTY TRANSACTIONS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In 2017 and amended in April 2018, the Company
entered into two asset purchase and license agreements (the “Surface License Agreements”) with its previously wholly
owned subsidiary, Surface. Pursuant to the terms of the Surface License Agreements, the Company assigned and licensed to Surface
certain intellectual property and related rights associated with Surface’s drug candidates (collectively, the “Surface
Products”). Surface is required to make royalty payments to the Company of four to six percent (4%-6%) of net sales of the
Surface Products while any patent rights remain outstanding. Certain of the Surface License Agreements were conditioned upon Surface
receiving net proceeds of the sale of its equity securities of not less than $10,000, which occurred in May 2018. See also Note
2, under the subheading <i>Investment in Surface Pharmaceuticals, Inc</i>.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2018, the Company and Surface entered
into an amended Management Services Agreement (the “MSA”), whereby the Company provided to Surface certain administrative
services and support, including bookkeeping, web services and human resources related activities, and Surface paid the Company
a monthly amount of $10. The MSA was terminated effective July 31, 2018.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2019, the
Company was paid $50 from Surface for amounts due under the Surface MSA. There are no amounts due from Surface to the Company as
of December 31, 2019.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2019, the Company owned
3,500,000 shares of Surface common stock (approximately 30% of the issued and outstanding equity interests). A Company director,
Richard L. Lindstrom, and the Company’s Chief Executive Officer, Mark L. Baum, are directors of Surface. In addition, the
Company’s Chief Financial Officer, Andrew R. Boll, was a director of Surface and resigned as a director of Surface concurrent
with the sale of the Surface Series A Stock. Several employees and a director of the Company (including Mr. Baum, Dr. Lindstrom
and Mr. Boll) entered into consulting agreements and provided consulting services to Surface. Surface is required to make royalty
payments to Dr. Lindstrom of 3% of net sales of certain Surface products while certain patent rights remain outstanding. Dr. Lindstrom
is also a principal of Flying L Partners, an affiliate of the funding investor who purchased the Surface Series A Stock.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The unaudited condensed results of operations information of Surface
is summarized below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Revenues, net</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 42%; padding-bottom: 1.5pt"><font style="font-size: 10pt">Loss from operations</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; width: 1%"> </td>
<td style="border-bottom: black 1.5pt solid; width: 26%; text-align: right"><font style="font-size: 10pt">4,000</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; width: 1%"> </td>
<td style="border-bottom: black 1.5pt solid; width: 26%; text-align: right"><font style="font-size: 10pt">1,370</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Net loss</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(4,000</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(1,370</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The unaudited condensed balance sheet information
of Surface is summarized below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">At December 31,</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">At December 31,</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">Current assets</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">15,942</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">19,699</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Non current assets</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">47</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">50</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Total assets</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">15,989</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">19,749</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total liabilities</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">619</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">165</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Total stockholders equity</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">15,370</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">19,584</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Total liabilities and stockholders’ equity</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">15,989</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">19,749</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 7. INVENTORIES </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories are comprised of finished compounded
formulations, over-the-counter and prescription retail pharmacy products, commercial pharmaceutical products, related laboratory
supplies and active pharmaceutical ingredients. The composition of inventories as of December 31, 2019 and 2018 was as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2019</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 42%"><font style="font-size: 10pt">Raw materials</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 26%; text-align: right"><font style="font-size: 10pt">2,405</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 26%; text-align: right"><font style="font-size: 10pt">1,119</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Work in progress</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">20</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">6</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Finished goods</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">876</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">709</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total inventories</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,301</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,834</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 8. PREPAID EXPENSES AND OTHER CURRENT ASSETS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Prepaid expenses and other current assets consisted
of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2019</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 50%"><font style="font-size: 10pt">Prepaid insurance</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 10pt">123</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 10pt">328</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Other prepaid expenses</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">358</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">334</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Receivable due from Surface</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">50</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Receivable due from Melt</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">722</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Deposits and other current assets</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">105</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">125</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total prepaid expenses and other current assets</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,308</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">837</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-indent: -0.75in"><b>NOTE 9. PROPERTY, PLANT AND
EQUIPMENT </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property, plant and equipment at December 31,
2019 and 2018 consisted of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2019</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Property, plant and equipment, net:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 50%; padding-left: 10pt"><font style="font-size: 10pt">Computer software and hardware</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 10pt">1,732</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 10pt">1,662</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Furniture and equipment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">363</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">397</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Lab and pharmacy equipment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3,164</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3,184</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Leasehold improvements</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5,510</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5,496</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">10,769</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">10,739</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Accumulated depreciation and amortization</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(5,394</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(4,364</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">5,375</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6,375</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recorded depreciation and amortization
expense of $1,936 and $1,608 during the years ended December 31, 2019 and 2018, respectively.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 10. INTANGIBLE ASSETS AND GOODWILL</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s intangible assets at December
31, 2019 consisted of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">Amortization</font></td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Net</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">periods</font></td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Accumulated</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Carrying</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">(in years)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Cost</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">amortization</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Impairment</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">value</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 36%"><font style="font-size: 10pt">Patents</font></td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: center"><font style="font-size: 10pt">17-19 years</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">1,102</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">(97</font></td>
<td style="width: 1%"><font style="font-size: 10pt">)</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">(259</font></td>
<td style="width: 1%"><font style="font-size: 10pt">)</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">746</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Licenses</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">20 years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">50</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(5</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">45</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Trademarks</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">Indefinite</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">340</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">340</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Customer relationships</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">3-15 years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(1,165</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(630</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,205</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Trade name</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">5 years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">16</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(14</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(2</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Non-competition clause</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 10pt">3-4 years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">294</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(274</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(20</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">State pharmacy licenses</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 10pt">25 years</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">45</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(9</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(35</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">4,847</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(1,564</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(946</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,337</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2019 the
Company incurred impairment charges of $612 related to intangible assets, including customer relationships, trade name, and state
pharmacy licenses as a part of the Park Restructuring and $259 of impairment charges related to patents associated with the termination
of an asset agreement.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Amortization expense for intangible assets
for the year ended December 31 was as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 42%"><font style="font-size: 10pt">Patents</font></td>
<td style="width: 2%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 25%; text-align: right"><font style="font-size: 10pt">48</font></td>
<td style="width: 1%"> </td>
<td style="width: 2%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 25%; text-align: right"><font style="font-size: 10pt">28</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Licenses</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Customer relationships</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">151</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">201</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Trade name</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">4</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Non-competition clause</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">State pharmacy licenses</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">209</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">235</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Estimated future amortization expense for the
Company’s intangible assets at December 31, 2019 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 82%; padding-bottom: 1.5pt"><font style="font-size: 10pt"><u>Years ending December 31,</u></font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%"> </td>
<td style="width: 15%"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2020</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">187</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">187</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2022</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">187</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2023</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">187</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2024</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">159</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Thereafter</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,430</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,337</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Changes in the carrying value of the Company’s
goodwill during the year ended December 31, 2019 were:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 82%"><font style="font-size: 10pt">Balance at December 31, 2018</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">2,227</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Impairment of Park goodwill (see Note 2)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(1,895</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Balance at December 31, 2019</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">332</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"><b>NOTE 11.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts payable and accrued expenses at December
31, 2019 and 2018 consisted of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2019</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 50%"><font style="font-size: 10pt">Accounts payable</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 10pt">7,409</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 10pt">4,966</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Other accrued expenses</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">49</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">640</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Deferred rent</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">388</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Accrued interest (see Note 12)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">244</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">256</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Accrued exit fee for note payable (see Note 12)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">800</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">800</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Total accounts payable and accrued expenses</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8,502</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">7,050</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: Current portion</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(7,702</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(6,250</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Non-current total accrued expenses</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">800</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">800</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 12. DEBT</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>SWK Senior Note – 2017</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2017, the Company entered into a term
loan and security agreement in the principal amount of $16,000 (the “SWK Loan Agreement” or “SWK Loan”)
with SWK Funding LLC and its partners (“SWK”), as lender and collateral agent. The SWK Loan Agreement was fully funded
at closing with a five-year term, however, such term could be reduced to four years if certain revenue requirements are not achieved.
The SWK Loan is secured by nearly all of the Company’s assets, including its intellectual property rights.</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">Prior to the loan refinance in May 2019 (see
below), the SWK Loan was bearing interest at a variable rate equal to the three-month London Inter-Bank Offered Rate (subject to
a minimum of 1.50% and maximum of 3.00%), plus an applicable margin of 10.50%. The SWK Loan Agreement permitted the Company to
pay interest only on the principal amount loaned thereunder for the first six payments (payments are due on a quarterly basis),
which interest-only period could have been reduced to four payments if the Company had not met certain minimum revenue requirements.
Following the interest-only period, the Company was required to pay interest, plus repayments of the principal amount loaned under
the SWK Loan Agreement, in quarterly payments, which shall not exceed $750 per quarter. All amounts owed under the SWK Loan Agreement,
including a final fee equal to 5% of the aggregate principal amount loaned thereunder, were previously due and payable on July
19, 2022. The Company is obligated under the SWK Loan Agreement to pay for certain expenses incurred by the SWK Lender through
and after the date of the SWK Loan Agreement, including certain fees and expenses relating to the preparation and administration
of the SWK Loan Agreement. The Company incurred expenses and final fee of approximately $1,282 in connection with the SWK Loan
Agreement. The final fee and expenses are being amortized as interest expense over the term of the SWK Loan using the effective
interest rate method and the related liability of $800 for the final fee is included in accrued expenses (see Note 11) in the accompanying
consolidated balance sheets as of December 31, 2019 and 2018.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the SWK Loan Agreement,
the Company issued to SWK warrants to purchase up to 415,586 shares of the Company’s common stock (the “Lender Warrants”)
with an exercise price of $3.08. In August 2017, the Company and SWK amended the warrants, to allow for the purchase up to 615,386
warrants with an exercise price of $2.08. The Lender Warrants are exercisable immediately, and have a term of 7 years. The Lender
Warrants are subject to a cashless exercise feature, with the exercise price and number of shares issuable upon exercise subject
to change in connection with stock splits, dividends, reclassifications and other conditions. The relative fair value of the Lender
Warrants was approximately $982 and was estimated using the Black-Scholes-Merton option pricing model with the following assumptions:
fair value of the Company’s common stock at issuance of $2.08 per share; seven-year contractual term; 113.5% volatility;
0% dividend rate; and a risk-free interest rate of 1.77%.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>SWK Refinance – May 2019</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2019, the Company entered into a joinder
and amendment (the “Amendment”) to the SWK Loan and SWK, as lender and collateral agent. A summary of the material
changes contained in the Amendment are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 24px"> </td>
<td style="width: 24px"><font style="font: 10pt Times New Roman, Times, Serif">●</font></td>
<td style="text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The interest rate calculation that the loan bears is now equal to the three-month London Inter-Bank Offered Rate (subject to a minimum of 2.00%), plus an applicable margin of 10.00% (the “Margin Rate”); provided that, if, two days prior to a payment date, the Company provides SWK evidence that the Company has achieved a leverage ratio as of such date of less than 4.00:1:00, the Margin Rate shall equal 9.00%; and if the Company has achieved a leverage ratio as of such date of less than 3.00:1:00, the Margin Rate shall equal 7.00%;</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font: 10pt Times New Roman, Times, Serif">●</font></td>
<td style="text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Leverage ratio in the Amendment means, as of any date of determination, the ratio of: (a) indebtedness as of such date to (b) EBITDA (as defined in the SWK Loan), of the Company for the immediately preceding twelve (12) month period, adding-back (i) actual litigation expenses for the immediately preceding twelve (12) month period, minus (ii) actual litigation expenses for the immediately preceding three (3) month period multiplied by four (4);</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font: 10pt Times New Roman, Times, Serif">●</font></td>
<td style="text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The definition of the first amortization date was changed to May 14, 2020, permitting the Company to pay interest only on the principal amount loaned for the next four payments (payments are due on a quarterly basis) following the Amendment; and</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font: 10pt Times New Roman, Times, Serif">●</font></td>
<td style="text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Subject to the satisfaction of certain revenue and market capitalization requirements and conditions, SWK agreed to make available to the Company an additional principal amount of up to $5,000.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition to the terms described above, the
Amendment joined the Company’s recently created subsidiaries to the SWK Loan and added definitions related to excluded subsidiaries
that are not considered co-borrowers and are subsidiaries of the Company which the Company believes it will eventually deconsolidate
from its financials and lose 50% or more of the equity interests of the subsidiary.</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">Related to the Amendment, the Company incurred
expenses related to legal and lender costs of $282 that are included in debt discount and will be amortized over the term of the
SWK Loan.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">At December 31, 2019, future minimum payments under the Company’s
note payable were as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Amount</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 82%"><font style="font: 10pt Times New Roman, Times, Serif">2020</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 15%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,703</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">4,121</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">2022</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,828</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">2023</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">7,573</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Total minimum payments</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">19,225</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Less: amount representing interest</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(3,975</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Notes payable, gross</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">15,250</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Less: unamortized discount</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,259</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">13,991</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Less: current portion, net of unamortized discount</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,772</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Note payable, net of current portion and unamortized debt discount</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">12,219</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the years ended December 31, 2019 and
2018, debt discount amortization related to the note payable was $495 and $520, respectively.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"><b>NOTE 13.
LEASES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company adopted Topic 842 on January 1,
2019. Topic 842 allows the Company to elect a package of practical expedients, which include: (i) an entity need not reassess whether
any expired or existing contracts are or contain leases; (ii) an entity need not reassess the lease classification for any expired
or existing leases; and (iii) an entity need not reassess any initial direct costs for any existing leases. Another practical expedient
allows the Company to use hindsight in determining the lease term when considering lessee options to extend or terminate the lease
and to purchase the underlying asset. The Company has elected to utilize the package of practical expedients and has not elected
the hindsight methodology in its implementation of Topic 842.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company elected to adopt this standard
using the modified retrospective transition method and recognized a cumulative-effect adjustment to the consolidated balance sheet
on the date of adoption. Comparative periods have not been restated. With the adoption of Topic 842, the Company’s consolidated
balance sheet now contains the following line items: Right-of-use assets, Operating lease liabilities—short-term and Operating
lease liabilities—long-term.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company determined that it held the following
significant operating leases of office and laboratory space as of December 31, 2019 (square footage is not described in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 24px"> </td>
<td style="width: 24px"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">An operating lease for 10,200 square feet of office space in San Diego, California that expires in December 2021, with an option to extend the term for a five-year period;</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">An operating lease for 4,500 square feet of office and lab space in Irvine, California that expires in December 2020, with an option to extend the term for up to two five-year periods. As part of the Park Restructuring, the Company assessed its obligations under this lease. As of the date of this Annual Report, the Company expects to sublease this space and has determined that there is a practical ability to do so, and as a result did not recognize any impairment costs related to this lease and the Company’s right-to-use asset;</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">An operating lease for 25,000 square feet of lab, warehouse and office space in Ledgewood, New Jersey that expires in July 2024, with an option to extend the term for two additional five-year periods; and</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">An operating lease for 5,500 square feet of office space in Nashville, Tennessee that expires in December 2024, with an option to extend the term for two additional five-year periods.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The extensions within the San Diego, California
and Ledgewood, New Jersey operating lease agreements were included within the Company’s calculation of the new lease standard
as the Company is reasonably certain it will exercise its option to extend these leases. The extensions within the Nashville lease
were not included within the Company’s calculation of the new lease standards as the Company is not reasonably certain it
will exercise its option to extend that lease. The Company has elected to not recognize right-of-use assets and lease liabilities
arising from short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do
not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The previously classified capital leases are
now classified as finance leases under the new standard. The Company has determined that the identified finance leases did not
contain non-lease components and require no further allocation of the total lease cost. The Company has determined that the identified
operating leases did contain non-lease components and elected an accounting policy to combine non-lease and lease components to
determine the total lease cost. Additionally, the operating agreements in place did not contain information to determine the rate
implicit in the leases. As such, the Company calculated the incremental borrowing rate based on the assumed remaining lease term
for each lease in order to calculate the present value of the remaining lease payments. At December 31, 2019, the weighted average
incremental borrowing rate and the weighted average remaining lease term for the operating leases held by the Company were 6.3%
and 10.21 years, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Upon adoption of Topic 842, the Company recorded
a $6,325 increase in operating lease right-of-use assets, a $388 decrease in accounts payable and accrued expenses and a $6,712
increase in operating lease liability. The Company did not record any cumulative effect adjustments to opening stockholders’
equity. In October 2019 the Company signed a new operating lease for 5,500 square feet of office space in Nashville, Tennessee.
Upon the execution of the lease, the Company recorded a $753 increase in operating lease right-of-use assets and operating lease
liability. As of December 31, 2019, right-of-use assets and liabilities arising from operating leases were $6,559 and $6,967, respectively.
During the year ended December 31, 2019, cash paid for amounts included for the operating lease liabilities totaled $905 and the
Company recorded operating lease expense of $892 included in selling, general and administrative expenses, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Future lease payments under operating leases
as of December 31, 2019 were as follows<b>: </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Operating Leases</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 82%"><font style="font-size: 10pt">2020</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">1,095</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">978</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2022</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">998</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2023</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,023</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2024</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,023</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Thereafter</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,465</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total minimum lease payments</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">9,582</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Less: amount representing interest payments</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(2,615</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Total operating lease liabilities</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">6,967</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Less: current portion, operating lease liabilities</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(629</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Operating lease liabilities, net of current portion</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6,338</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company also has one additional finance
lease that is included in its lease accounting but is not considered significant.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Future lease payments under non-cancelable
finance leases as of December 31, 2019 were as follows<b>: </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Finance Lease</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 82%"><font style="font-size: 10pt">2020</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">9</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">9</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2022</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">9</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2023</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">9</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">2024</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Total minimum lease payments</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">37</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: amount representing interest payments</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(4</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Present value of future minimum lease payments</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">33</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: current portion, finance lease obligation</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(7</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Finance lease obligation, net of current portion</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">26</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2019, the weighted average
incremental borrowing rate and the weighted average remaining lease term for the finance leases held by the Company were 6.36%
and 4.08 years, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the year ended December 31, 2019, debt
discount amortization related to a finance lease obligation was $17, and included in interest expense, net.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the year ended December 31, 2019, depreciation
expense related to the equipment held under the finance lease obligations was $150.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the year ended December, 2019, cash paid
and expense recognized for interest expense related to finance lease obligations was $18.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Future minimum lease payments under operating
leases and future minimum capital lease payments as of December 31, 2018 were as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Capital Leases</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Operating Leases</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 62%"><font style="font-size: 10pt">2019</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">751</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">797</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2020</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">857</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">742</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2022</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">320</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2023</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">330</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Thereafter</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">196</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">751</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,242</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Less: Amounts representing interest</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(15</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: Amounts representing unamortized discount</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(16</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Total obligation under capital leases</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">720</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: Current portion of capital leases</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(720</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Long term capital lease obligation</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"><b>NOTE 17.
COMMITMENTS AND CONTINGENCIES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Legal</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Dr. Sobol </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2016, Louis L. Sobol, M.D. (“Sobol”)
filed a lawsuit in the U.S. District Court for the Eastern District of Michigan, Southern Division against the Company, asserting
claims on behalf of himself and an as-yet-uncertified class of consumers. The claims allege violations under the Telephone Consumer
Protection Act, 47 U.S.C. § 227 via the Company’s alleged transmittal of advertisements to its clients via facsimile.
The Court approved the parties’ proposed settlement agreement in the spring of 2019. During the year ended December 31, 2018,
the Company accrued $640 for expected damages related to this matter and the proposed settlement amount. As a result of the low
claim rate of approximately 1.4%, the Company’s total damages were $571, which was paid in October 2019. This formally resolved
all known disputes between the parties.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Allergan USA</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In September 2017, Allergan USA, Inc. (“Allergan”)
filed a lawsuit in the U.S. District Court for the Central District of California against the Company, primarily claiming violations
under the federal Lanham Act and California’s Sherman Act. The Court granted in part and denied in part each parties’
motions for summary judgement, resolving all issues except for whether Allergan was entitled to damages related to the Company’s
purported Lanham Act violations. The parties went to trial in May 2019 to litigate damages related to the Lanham Act, and a jury
found the Company liable for only $49 in lost profit damages, which was accrued as an expense during the period ended December
31, 2019 (see Note 11). In July 2019, the Court entered a permanent injunction, the scope of which is limited to compounded drugs
prepared in, dispensed from within, or shipped to the state of California. The injunction requires the Company to: (1) only dispense
drugs from a 503(a) facility with a “Valid Prescription Order”; (2) abide by the FDA’s anticipatory compounding
guidelines; and (3) only use bulk drug substances identified on a list established by the Secretary of Health and Human Services
or FDA’s interim “Category 1” list. The Company believes it was already in compliance with the order, prior to
the injunction being ordered. On October 2, 2019, Allergan and the Company filed a joint stipulation to voluntarily dismiss each
parties’ respective pending appeals arising out of the lawsuit. No economic consideration was exchanged between the parties
related to the filing of the joint stipulation. This formally resolved all known disputes between the parties.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>California Board of Pharmacy</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In March 2018, the California Board of Pharmacy
filed an accusation against Park related to a compounded formulation the Company believes was legally dispensed and was, without
its knowledge, inappropriately administered to a patient unknown to Park, by the prescribing healthcare professional. Park filed
a response to the accusation and requested a formal hearing. In April 2019, Park agreed to, and the California State Board of Pharmacy
approved terms of a settlement agreement (the “Settlement Agreement”) that became effective on May 29, 2019. Pursuant
to the terms of the Settlement Agreement, Park was required to, and did, surrender its California pharmacy license by August 27,
2019. This formally resolved all known disputes between the parties.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Novel Drug Solutions et al.</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2018, Novel Drug Solutions, LLC and
Eyecare Northwest, PA (collectively “NDS”) filed a lawsuit against the Company in the U.S. District Court of Delaware
asserting claims for breach of contract. The claims stem from an asset purchase agreement between the Company and NDS entered into
in 2013. In July 2019, NDS filed a second amended complaint which added a claim related to its purported termination of the APA.
In October 2019, NDS voluntarily dismissed all claims related to breach of contract, leaving only claims related to the scope of
the post-termination obligations to be litigated. The Company believes the claims are meritless and has previously and will continue
to dispute all claims asserted against it and intends to vigorously defend against these allegations. Nonetheless, the Company
cannot predict the eventual outcome of this litigation and, it could result in substantial costs, losses and a diversion of management’s
resources and attention, which could harm the Company’s business and the value of its common stock.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Product and Professional Liability</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Product and professional liability litigation
represents an inherent risk to all firms in the pharmaceutical and pharmacy industry. We utilize traditional third-party insurance
policies with regard to our product and professional liability claims. Such insurance coverage at any given time reflects current
market conditions, including cost and availability, when the policy is written.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>John Erick et al.</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2018, John Erick and Deborah Ferrell,
successors-in-interest and heirs of Jade Erick, (collectively “Erick”) filed a lawsuit in the San Diego County Superior
against Kim Kelly, ND, MPH asserting claims related to death of Jade Erick. In April 2018, Erick filed an amendment to the lawsuit,
naming us as a co-defendant. In September 2018, co-defendant Dr. Kelly filed a cross-complaint against the Company and various
entities affiliated with Spectrum Laboratory Products, Inc., Spectrum Chemical Manufacturing Corp. and Spectrum Pharmacy Products,
Inc. (collectively “Spectrum”). The cross-complaint seeks indemnity and contribution from the Company and Spectrum.
The Company answered the claims filed by Dr. Kelly in October 2018. The case is currently in the discovery phase. The Company believes
the claims are meritless and has previously and will continue to dispute all claims asserted against it and intends to vigorously
defend against these allegations. Nonetheless, the Company cannot predict the eventual outcome of this litigation, it could result
in substantial costs, losses and a diversion of management’s resources and attention, which could harm the Company’s
business and the value of its common stock.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Anna Sue Gaukel et al.</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In June 2019, Anna Sue Gaukel and Lawrence
Gaukel served the Company with a lawsuit filed in state court in Idaho against Imprimis Pharmaceuticals, Inc. asserting class action
allegations and product liability claims related to Mrs. Gaukel’s doctor’s use of a compounded drug injection in each
of her eyes. In June 2019, the Company removed the case to Federal Court and subsequently answered the complaint. On January 24,
2020, the plaintiffs and the Company filed a joint stipulation, and the case was dismissed with prejudice. No economic consideration
was exchanged between the parties related to the filing of the joint stipulation. This formally resolved all known disputes between
the parties as connected to this matter.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>General and Other</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In the ordinary course of business, the Company
may face various claims brought by third parties and it may, from time to time, make claims or take legal actions to assert its
rights, including intellectual property disputes, contractual disputes and other commercial disputes. Any of these claims could
subject the Company to litigation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Indemnities</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition to the indemnification provisions
contained in the Company’s charter documents, the Company generally enters into separate indemnification agreements with
each of the Company’s directors and officers. These agreements require the Company, among other things, to indemnify the
director or officer against specified expenses and liabilities, such as attorneys’ fees, judgments, fines and settlements,
paid by the individual in connection with any action, suit or proceeding arising out of the individual’s status or service
as the Company’s director or officer, other than liabilities arising from willful misconduct or conduct that is knowingly
fraudulent or deliberately dishonest, and to advance expenses incurred by the individual in connection with any proceeding against
the individual with respect to which the individual may be entitled to indemnification by the Company. The Company also indemnifies
its lessors in connection with its facility leases for certain claims arising from the use of the facilities. These indemnities
do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically,
the Company has not incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities
in the accompanying consolidated balance sheets.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Sales and Marketing Agreements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During 2017 through 2019, the Company entered
various sales and marketing agreements with certain organizations, to provide sales and marketing representation services to ImprimisRx
in select geographies in the U.S., in connection with the Company’s ophthalmic compounded formulations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under the terms of the sales and marketing
agreements, the Company is required to make commission payments to equal to 10% - 14% of net sales for products above and beyond
the initial existing sales amounts. In addition, the Company is required to make periodic milestone payments to certain organizations
in shares of the Company’s restricted common stock if net sales in the assigned territory reach certain future levels by
the end of their terms, as applicable. The Company accrued and recorded in additional paid in capital $159 and $42 related to stock-based
payments for these agreements during the year ended December 31, 2019 and 2018, respectively, and $2,700 and $1,511 were incurred
under these agreements for commission expenses during the years ended December 31, 2019 and 2018, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Asset Purchase, License and Related Agreements
</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has acquired and sourced intellectual
property rights related to certain proprietary innovations from certain inventors and related parties (the “Inventors”)
through multiple asset purchase agreements, license agreements, strategic agreements and commission agreements. In general, these
agreements provide that the Inventors will cooperate with the Company in obtaining patent protection for the acquired intellectual
property and that the Company will use commercially reasonable efforts to research, develop and commercialize a product based on
the acquired intellectual property. In addition, the Company has acquired a right of first refusal on additional intellectual property
and drug development opportunities presented by these Inventors.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In consideration for the acquisition of the
intellectual property rights, the Company is obligated to make payments to the Inventors based on the completion of certain milestones,
generally consisting of: (1) a payment payable within 30 days after the issuance of the first patent in the United States arising
from the acquired intellectual property (if any); (2) a payment payable within 30 days after the Company files the first investigational
new drug application (“IND”) with the FDA for the first product arising from the acquired intellectual property (if
any); (3) for certain of the Inventors, a payment payable within 30 days after the Company files the first new drug application
with the FDA for the first product arising from the acquired intellectual property (if any); and (4) certain royalty payments based
on the net receipts received by the Company in connection with the sale or licensing of any product based on the acquired intellectual
property (if any), after deducting (among other things) the Company’s development costs associated with such product. If,
following five years after the date of the applicable asset purchase agreement, the Company either (a) for certain of the Inventors,
has not filed an IND or, for the remaining Inventors, has not initiated a study where data is derived, or (b) has failed to generate
royalty payments to the Inventors for any product based on the acquired intellectual property, the Inventors may terminate the
applicable asset purchase agreement and request that the Company re-assign the acquired technology to the Inventors. $371 and $245
were accrued in accounts payable and accrued expenses under these agreements during the years ended December 31, 2019 and 2018,
respectively, and $846 and $561 were incurred under these agreements as royalty expenses for the years ended December 31, 2019
and 2018, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Mayfield License</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2019, Mayfield entered into a License
Agreement (the “TGV License”) with TGV to acquire intellectual property rights for use in the women’s health
field, related to Mayfield’s proprietary drug candidate MAY-66. The TGV License provides that TGV will cooperate with Mayfield
in transferring all embodiments of the intellectual property (including know-how) related to the TGV License, assist in obtaining
and protecting its patent rights for the acquired intellectual property and that Mayfield will use commercially reasonable efforts
to research, develop and commercialize products based on the acquired intellectual property. In connection with the TGV License,
Mayfield is obligated to make royalty payments to TGV equal to a low single digit percentage of net sales received by Mayfield
in connection with the sale or licensing of any product based on the licensed intellectual property. In addition, Mayfield issued
300,000 shares of its common stock to TGV and is required to make certain milestone payments to TGV over the development of MAY-66
and any related products based on the licensed intellectual property.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Stowe License</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2019, Stowe entered into a License
Agreement (the “Stowe License”) with TGV, to acquire intellectual property rights for use in the ophthalmology and
otic health field, related to Stowe’s proprietary drug candidate STE-006. The Stowe License provides that TGV will cooperate
with Stowe in transferring all embodiments of the intellectual property (including know-how) related to the Stowe License, assist
in obtaining and protecting its patent rights for the acquired intellectual property and that Stowe will use commercially reasonable
efforts to research, develop and commercialize products based on the acquired intellectual property. In connection with the Stowe
License, Stowe is obligated to make royalty payments to TGV equal to a low single digit percentage of net sales received by Stowe
in connection with the sale or licensing of any product based on the licensed intellectual property. In addition, Stowe issued
1,750,000 shares of its common stock to TGV and is required to make certain milestone payments to TGV over the development of STE-006
and any related products based on the licensed intellectual property.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Klarity License Agreement – Related Party</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2017, the Company entered into a license
agreement (the “Klarity License Agreement”) with Richard L. Lindstrom, M.D., a member of its Board of Directors. Pursuant
to the terms of the Klarity License Agreement, the Company licensed certain intellectual property and related rights from Dr. Lindstrom
to develop, formulate, make, sell, and sub-license the topical ophthalmic solution Klarity designed to protect and rehabilitate
the ocular surface (the “Klarity Product”).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under the terms of the Klarity License Agreement,
the Company is required to make royalty payments to Dr. Lindstrom ranging from 3% to 6% of net sales, dependent upon the final
formulation of the Klarity Product sold. In addition, the Company is required to make certain milestone payments to Dr. Lindstrom
including: (i) an initial payment of $50 upon execution of the Klarity License Agreement, (ii) a second payment of $50 following
the first $50 in net sales of the Klarity Product; and (iii) a final payment of $50 following the first $100 in net sales of the
Klarity Product. All of the above referenced milestone payments were payable at the Company’s election in cash or shares
of the Company’s restricted common stock. Dr. Lindstrom was paid $63 and $122 in cash during the years ended December 31,
2019 and 2018, respectively, and was due an additional $55 and $15 at December 31, 2019 and 2018, respectively. The Company incurred
$103 and $118 for royalty expenses related to the Klarity License Agreement during the years ended December 31, 2019 and 2018,
respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Injectable Asset Purchase Agreement –
Related Party</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2019, the Company entered into
an asset purchase agreement (the “Lindstrom APA”) with Dr. Lindstrom, a member of its Board of Directors. Pursuant
to the terms of the Lindstrom APA, the Company acquired certain intellectual property and related rights from Dr. Lindstrom to
develop, formulate, make, sell, and sub-license an ophthalmic injectable product (the “Lindstrom Product”).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under the terms of the Lindstrom APA, the Company
is required to make royalty payments to Dr. Lindstrom ranging from 2% to 3% of net sales, dependent upon the final formulation
and patent protection of the Lindstrom Product sold. In addition, the Company is required to make certain milestone payments to
Dr. Lindstrom including an initial payment of $33 upon execution of the Lindstrom APA. Dr. Lindstrom was paid $0 in cash during
the year ended December 31, 2019, and was due $40 at December 31, 2019. The Company incurred $40 for royalty expenses related to
the Lindstrom Agreement during the year ended December 31, 2019.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Presbyopia Asset Purchase Agreement –
Related Party</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2019, the Company entered into
an asset purchase agreement (the “Presbyopia APA”) with Dr. Lindstrom, a member of its Board of Directors. Pursuant
to the terms of the Presbyopia APA, the Company acquired certain intellectual property and related rights from Dr. Lindstrom to
develop, formulate, make, sell, and sub-license an ophthalmic topical product to treat presbyopia (the “Presbyopia Product”).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under the terms of the Presbyopia Product,
the Company is required to make royalty payments to Dr. Lindstrom ranging from 2% to 4% of net sales, dependent upon the final
formulation and patent protection of the Presbyopia Product sold. Dr. Lindstrom was paid $0 in cash during the year ended December
31, 2019, and was due $0 at December 31, 2019. The Company incurred $0 for royalty expenses related to the Presbyopia APA during
the year ended December 31, 2019.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"><b>NOTE 18.
SEGMENT INFORMATION AND CONCENTRATIONS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Beginning on January 1, 2019, the Company began
evaluating performance of the Company based on operating segments. Segment performance for its two operating segments are based
on segment contribution. The Company’s reportable segments consist of (i) its commercial stage pharmaceutical compounding
business (Pharmaceutical Compounding), generally including the operations of ImprimisRx and the former Park businesses; and (ii)
its start-up operations associated with pharmaceutical drug development business (Pharmaceutical Drug Development). Segment contribution
for the segments represents net revenues less cost of sales, research and development, selling and marketing expenses, and select
general and administrative expenses. The Company does not evaluate the following items at the segment level:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 24px"> </td>
<td style="width: 24px"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Selling, general and administrative expenses that result from shared infrastructure, including certain expenses associated with legal matters, public company costs (e.g. investor relations), board of directors and principal executive officers and other like shared expenses.</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Operating expenses within selling, general and administrative expenses that result from the impact of corporate initiatives. Corporate initiatives primarily include integration, restructuring, acquisition and other shared costs.</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Other select revenues and operating expenses including R&D expenses, amortization, and asset sales and impairments, net as not all such information has been accounted for at the segment level, or such information has not been used by all segments.</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Total assets including capital expenditures.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company defines segment net revenues as
pharmaceutical compounded drug sales, licenses and other revenue derived from related agreements.</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">Cost of sales within segment contribution includes
direct and indirect costs to manufacture formulations and sell products, including active pharmaceutical ingredients, personnel
costs, packaging, storage, royalties, shipping and handling costs, manufacturing equipment and tenant improvements depreciation,
the write-off of obsolete inventory and other related expenses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Selling, general and administrative expenses
consist mainly of personnel-related costs, marketing and promotion costs, distribution costs, professional service costs, insurance,
depreciation, facilities costs, transaction costs, and professional services costs which are general in nature and attributable
to the segment.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Segment net revenues, segment operating expenses
and segment contribution information consisted of the following for the year ended December 31, 2019:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">For the Year Ended December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Pharmaceutical</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Pharmaceutical</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Compounding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Drug Development</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Total</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 41%"><font style="font-size: 10pt">Net revenues</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; text-align: right"><font style="font-size: 10pt">51,165</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; text-align: right"><font style="font-size: 10pt">      -</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 14%; text-align: right"><font style="font-size: 10pt">51,165</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Cost of sales</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(16,749</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(16,749</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Gross profit</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">34,416</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">34,416</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Operating expenses:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Selling, general and administrative</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">24,468</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">174</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">24,642</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Research and development</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,006</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">361</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,367</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Segment contribution</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">8,942</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(535</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$ </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">8,407</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Corporate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8,245</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Research and development</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">716</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Amortization</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">209</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Asset sales and impairments, net</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,040</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Operating loss</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(4,803</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company categorizes revenues by geographic
area based on selling location. All operations are currently located in the U.S.; therefore, total revenues are attributed to the
U.S. All long-lived assets at December 31, 2019 and December 31, 2018 are located in the U.S.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company sells its compounded formulations
to a large number of customers. There were no customers who comprised more than 10% of the Company’s total pharmacy sales
for the year ended December 31, 2019 and 2018.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company receives its active pharmaceutical
ingredients from three main suppliers. These suppliers collectively accounted for 73% of active pharmaceutical ingredient purchases
during the year ended December 31, 2019, and 51% during the year ended December 31, 2018.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 19. SUBSEQUENT EVENTS </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has performed an evaluation of
events occurring subsequent to December 31, 2019 through the filing date of this Annual Report and determined that no subsequent
events have occurred that would require recognition in the financial statements or disclosures in the notes thereto.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Liquidity</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">While there is no assurance, the Company believes
cash generated from its operations, along with its existing cash resources, restricted cash and marketable securities of approximately
$30,149 at December 31, 2019, will be sufficient to sustain the Company’s planned level of operations for at least the next
twelve months. However, estimates of operating expenses and working capital requirements could be incorrect, and the Company could
use its cash resources faster than anticipated. Further, some or all of the ongoing or planned activities may not be successful
and could result in further losses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company may seek to increase liquidity
and capital resources by one or more of the following which may include, but are not limited to: the sale of assets and/or businesses,
obtaining financing through the issuance of equity, debt, or convertible securities; and working to increase revenue growth through
sales. There is no guarantee that the Company will be able to obtain capital when needed on terms it deems as acceptable, or at
all.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Basic and Diluted Net Income per Common
Share</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic net income per common share is computed
by dividing income attributable to common stockholders for the period by the weighted average number of common shares outstanding
during the period. Diluted income per share is computed by dividing the income attributable to common stockholders for the period
by the weighted average number of common and common equivalent shares, such as stock options and warrants, outstanding during the
period.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic and diluted net income 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 stock options, unvested restricted stock units (“RSUs”) and
warrants were 4,848,459 and 6,201,355 at December 31, 2019 and 2018, respectively, and are excluded in the calculation of diluted
net income per share for the periods presented, because the effect is anti-dilutive for that time period. Included in the basic
and diluted net income per share calculation were RSUs awarded to directors that had vested, but the issuance and delivery of the
shares are deferred until the director resigns. The number of shares underlying vested RSUs at December 31, 2019 and 2018 was 324,303
and 236,693, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows the computation of
basic net income per share of common stock for the years ended December 31, 2019 and 2018:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td>
<td> </td>
<td colspan="2" style="text-align: right"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 50%; padding-bottom: 2.5pt"><font style="font-size: 10pt">Numerator – net income</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double; width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; width: 22%; text-align: right"><font style="font-size: 10pt">168</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double; width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; width: 22%; text-align: right"><font style="font-size: 10pt">14,625</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Denominator – weighted average number of shares outstanding, basic</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">25,323,159</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">21,917,570</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Net income per share, basic</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.01</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.67</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the years end December 31, 2019 and 2018,
the Company computed diluted net income per share using the weighted-average number of common shares and dilutive common equivalent
shares outstanding during that period. Diluted common equivalent shares for the years ended December 31, 2019 and 2018, respectively,consisted
of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Shares</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Shares</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 62%"><font style="font-size: 10pt">Diluted shares related to:</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">25,323,159</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">21,917,570</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Warrants</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">488,498</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,844,272</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Stock options</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">654,441</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">50,203</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Dilutive common equivalent shares</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">26,466,098</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">23,812,045</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows the computation of
diluted net income per share using the weighted-average number of common shares and dilutive common equivalent shares outstanding
for the years ended December 31, 2019 and 2018:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td>
<td> </td>
<td colspan="2" style="text-align: right"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; padding-bottom: 2.5pt"><font style="font-size: 10pt">Numerator – net income</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double; width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; width: 18%; text-align: right"><font style="font-size: 10pt">168</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double; width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; width: 18%; text-align: right"><font style="font-size: 10pt">14,625</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Weighted average number of shares outstanding, basic</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">25,323,159</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">21,917,570</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Dilutive common equivalents</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,142,939</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,894,475</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Denominator – number of shares used for diluted earnings per share computation</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">26,466,098</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">23,812,045</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Net income per share, diluted</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.01</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.61</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Recently Adopted Accounting Pronouncements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2016, the FASB issued new lease
accounting guidance in ASU 2016-02, <i>Leases</i> (Topic 842). This new guidance was initiated as a joint project with the International
Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of financial information
for users. This new guidance would eliminate the concept of off-balance sheet treatment for “operating leases” for
lessees for the vast majority of lease contracts. Under ASU 2016-02, at inception, a lessee must classify all leases with a term
of over one year as either finance or operating, with both classifications resulting in the recognition of a defined “right-of-use”
asset and a lease liability on the balance sheet. However, recognition in the income statement will differ depending on the lease
classification, with finance leases recognizing the amortization of the right-of-use asset separate from the interest on the lease
liability and operating leases recognizing a single total lease expense. Lessor accounting under ASU 2016-02 is substantially
unchanged from the previous lease requirements under GAAP. ASU 2016-02 took effect for public companies in fiscal years beginning
after December 15, 2018, including interim periods within those fiscal years. On January 1, 2019, the Company adopted Topic 842
using the modified retrospective transition method with no impact to stockholders’ equity. As of December 31, 2019, the
Company held on its consolidated balance sheet $6,559 for the right-of-use asset and $6,967 for the related lease liability related
to operating and finance leases. The difference between the right of use asset and related lease liability is predominantly deferred
rent and other related lease expenses under the new lease accounting standard. For additional information regarding how the Company
is accounting for leases under Topic 842, refer to Note 13.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Recently Issued Accounting Pronouncements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In June 2016, the FASB issued ASU 2016-13,
<i>Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments</i>, which requires the measurement
and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred
loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses.
The Company will adopt the new standard effective January 1, 2020 and does not expect the adoption of this guidance to have a material
impact on its consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2017, the FASB issued ASU 2017-04,
<i>Intangibles-Goodwill and Other</i>. This guidance simplifies the accounting for goodwill impairment for all entities by requiring
impairment charges to be based on the first step in the current two-step impairment test under ASC 350. The updated standard eliminates
the requirement to calculate a goodwill impairment charge using Step 2. If a reporting unit’s carrying amount exceeds its
fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount
of goodwill allocated to that reporting unit. ASU 2017-04 is effective for reporting periods beginning after December 31, 2019
on a prospective basis, and early adoption is permitted. The Company does not expect ASU 2017-04 to have a material effect on the
Company’s financial position, results of operations and cash flows.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2018, the FASB issued ASU 2018-13,
<i>Changes to Disclosure Requirements for Fair Value Measurements</i>, which improved the effectiveness of disclosure requirements
for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements.
The Company will adopt the new standard effective January 1, 2020 and does not expect the adoption of this guidance to have a material
impact on its consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2019, the FASB issued ASU 2019-12,
<i>Income Taxes</i>: <i>Simplifying the Accounting for Income Taxes</i> , which simplifies the accounting for income taxes. This
guidance will be effective for the Company in the first quarter of 2021 on a prospective basis, and early adoption is permitted.
The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenue disaggregated by revenue source for
the years ended December 31, 2019 and 2018, consists of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 10pt"><b>For the year ended</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2019</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 62%"><font style="font-size: 10pt"><b>Product sales, net</b></font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">51,137</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">41,334</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt"><b>License revenues</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">28</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">38</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt"><b>Total revenues</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">51,165</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">41,372</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The composition of inventories as of December
31, 2019 and 2018 was as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2019</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 42%"><font style="font-size: 10pt">Raw materials</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 26%; text-align: right"><font style="font-size: 10pt">2,405</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 26%; text-align: right"><font style="font-size: 10pt">1,119</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Work in progress</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">20</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">6</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Finished goods</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">876</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">709</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total inventories</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,301</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,834</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Prepaid expenses and other current assets consisted
of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2019</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 50%"><font style="font-size: 10pt">Prepaid insurance</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 10pt">123</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 10pt">328</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Other prepaid expenses</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">358</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">334</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Receivable due from Surface</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">50</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Receivable due from Melt</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">722</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Deposits and other current assets</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">105</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">125</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total prepaid expenses and other current assets</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,308</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">837</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property, plant and equipment at December 31,
2019 and 2018 consisted of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2019</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Property, plant and equipment, net:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 50%; padding-left: 10pt"><font style="font-size: 10pt">Computer software and hardware</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 10pt">1,732</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 10pt">1,662</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Furniture and equipment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">363</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">397</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Lab and pharmacy equipment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3,164</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3,184</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Leasehold improvements</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5,510</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5,496</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">10,769</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">10,739</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Accumulated depreciation and amortization</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(5,394</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(4,364</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">5,375</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6,375</font></td>
<td style="padding-bottom: 2.5pt"></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts payable and accrued expenses at December
31, 2019 and 2018 consisted of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2019</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 50%"><font style="font-size: 10pt">Accounts payable</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 10pt">7,409</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 10pt">4,966</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Other accrued expenses</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">49</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">640</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Deferred rent</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">388</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Accrued interest (see Note 12)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">244</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">256</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Accrued exit fee for note payable (see Note 12)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">800</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">800</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Total accounts payable and accrued expenses</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8,502</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">7,050</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: Current portion</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(7,702</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(6,250</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Non-current total accrued expenses</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">800</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">800</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">At December 31, 2019, future minimum payments under the Company’s
note payable were as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Amount</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 82%"><font style="font-size: 10pt">2020</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">3,703</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">4,121</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2022</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3,828</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">2023</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">7,573</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total minimum payments</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">19,225</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: amount representing interest</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(3,975</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Notes payable, gross</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">15,250</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: unamortized discount</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(1,259</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">13,991</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: current portion, net of unamortized discount</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(1,772</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Note payable, net of current portion and unamortized debt discount</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">12,219</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">A summary of stock option activity under the Plan for the year ended
December 31, 2019 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Number of shares</font></td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted Avg. Exercise Price</font></td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted Avg. Remaining Contractual Life</font></td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Aggregate Intrinsic Value</font></td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 44%"><font style="font-size: 10pt">Options outstanding - January 1, 2019</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"><font style="font-size: 10pt">2,482,009</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 11%; text-align: right"><font style="font-size: 10pt">5.09</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"> </td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Options granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">362,000</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">6.19</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Options exercised</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(85,051</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.56</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Options cancelled/forfeit</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(102,275</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">4.67</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Options outstanding - December 31, 2019</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,656,683</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">5.31</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.05</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">7,011</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Options exercisable</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,603,530</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">4.57</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.72</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">5,552</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Options vested and expected to vest</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,558,998</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">5.26</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.10</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">6,911</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below illustrates the fair value
per share determined using the Black-Scholes-Merton option pricing model with the following assumptions used for valuing options
granted to employees:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2019</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 66%"><font style="font-size: 10pt">Weighted-average fair value of options granted</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 14%; text-align: right"><font style="font-size: 10pt">3.72</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 14%; text-align: right"><font style="font-size: 10pt">1.42</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Expected terms (in years)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.07 - 7.00</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.77 - 6.11</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Expected volatility</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">64 - 78</font></td>
<td><font style="font-size: 10pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">76 - 126</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Risk-free interest rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.83 – 2.68</font></td>
<td><font style="font-size: 10pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2.05 – 3.00</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Dividend yield</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in">The following
table summarizes information about stock options outstanding and exercisable at December 31, 2019:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-indent: -0.75in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Weighted</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Average</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Weighted</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Weighted</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Remaining</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Average</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Average</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Number</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Contractual</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Exercise</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Number</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Exercise</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Range of Exercise Prices</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Life in Years</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Price</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Exercisable</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Price</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 35%"><font style="font-size: 10pt">$1.47 - $2.60</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">781,940</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">6.66</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">2.05</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">619,016</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">2.10</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">$3.04 - $4.50</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">458,622</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">6.09</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.96</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">440,124</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.98</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">$5.49 - $6.36</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">440,350</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">7.91</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">6.15</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">178,619</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">6.08</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">$6.64 - $8.99</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">970,741</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.99</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">8.01</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">360,741</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">8.24</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">$42.80</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5,030</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.62</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">42.80</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5,030</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">42.80</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$1.47 - $42.80</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,656,683</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.05</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">5.31</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,603,530</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">4.57</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of the Company’s RSU activity
and related information for the year ended December 31, 2018 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Number of RSUs</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Average Grant Date</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Fair Value</p></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">RSUs unvested - January 1, 2018</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,298,946</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">2.42</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">RSUs granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">136,360</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2.20</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">RSUs vested</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(159,626</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.94</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">RSUs cancelled/forfeit</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">RSUs unvested at December 31, 2018</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,275,680</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2.16</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin-top: 0; margin-bottom: 0"> </p>
<p style="margin-top: 0; margin-bottom: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of the Company’s RSU activity
and related information for the year ended December 31, 2019 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Number of RSUs</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Average Grant Date</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Fair Value</p></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">RSUs unvested - January 1, 2019</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,275,680</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">2.16</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">RSUs granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">223,860</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">6.43</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">RSUs vested</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(87,610</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.42</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">RSUs cancelled/forfeit</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">RSUs unvested at December 31, 2019</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,411,930</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2.76</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin-top: 0; margin-bottom: 0"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">A summary of warrant activity during the year ended December 31,
2019 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Number of Shares Subject to Warrants Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted Avg. Exercise Price</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 62%"><font style="font-size: 10pt">Warrants outstanding - January 1, 2019</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">2,206,973</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">1.91</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Exercised</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(1,418,587</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">1.79</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Expired</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(8,000</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">1.79</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Warrants outstanding and exercisable - December 31, 2019</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">780,386</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2.12</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Weighted average remaining contractual life of the outstanding warrants in years - December 31, 2019</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">4.53</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">All warrants outstanding as of December 31, 2019 are included in
the following table:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="9" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Warrants Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Warrants Exercisable</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Warrants</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Exercise</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Warrants</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Expiration</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Warrant Series</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Issue Date</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Price</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Exercisable</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Date</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 32%"><font style="font-size: 10pt">Lender warrants</font></td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"><font style="font-size: 10pt">5/11/2015</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"><font style="font-size: 10pt">125,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 11%; text-align: right"><font style="font-size: 10pt">1.79</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"><font style="font-size: 10pt">125,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"><font style="font-size: 10pt">5/11/2025</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Settlement warrants</font></td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8/16/2016</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">40,000</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.75</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">40,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8/16/2021</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Lender warrants (see Note 12)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">7/19/2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">615,386</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2.08</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">615,386</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">7/19/2024</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">780,386</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2.12</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">780,386</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recorded stock-based compensation
(including issuance of common stock for services and accrual for stock-based compensation) related to equity instruments granted
to employees, directors and consultants as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">Employees – selling, general and administrative</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,464</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">2,251</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Directors – selling, general and administrative</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">300</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">235</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Consultants - selling general and administrative</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">259</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">150</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,023</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,636</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
51165000
41334000
38000
51137000
28000
41372000
51165000
39219000
30068000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-indent: -0.75in"><b>NOTE 14. STOCKHOLDERS’
EQUITY AND STOCK-BASED COMPENSATION</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Common Stock</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2019 and 2018, the Company
had 50,000,000 shares of common stock, $0.001 par value, authorized, respectively. On July 10, 2018, the Company amended its amended
and restated certificate of incorporation to reduce the number of authorized shares of common stock from 90,000,000 to 50,000,000.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Issuances During the Year Ended December
31, 2018</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2018, the Company issued 25,273
shares of its restricted common stock, with a fair value of $44, in lieu of a cash payment for accrued royalty expenses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">RSUs granted in February 2015 to Andrew R.
Boll, the Company’s Chief Financial Officer, vested, and in February 2018, 30,000 shares the Company’s common stock
were issued to Mr. Boll.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">RSUs granted in February 2015 to John P. Saharek,
the President of ImprimisRx (formerly, the Company’s Chief Commercial Officer), vested, and in February 2018, 30,000 shares
the Company’s common stock were issued to Mr. Saharek.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In March 2018, the Company issued 35,427 shares
of its restricted common stock, with a fair value of $64, in lieu of a cash payment for accrued royalty expenses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2018, the Company issued 15,000
shares of its restricted common stock, with a fair value of $42, related to a milestone payment due under a sales and marketing
agreement.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company sold 305,619 shares of common stock
and received net proceeds of $642, after deducting $20 for sales commission and offering expenses, under the Sales Agreement during
the year ended December 31, 2018. In November 2018, the Company terminated the Sales Agreement.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2018, the
Company issued 2,364,889 shares of its common stock related to the exercise of common stock warrants with an exercise price of
$1.79, and received net proceeds of $4,233.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2018, the
Company issued 910,273 shares of its common stock related to the cashless exercise of 1,576,665 common stock warrants with an exercise
price of $1.79.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2018, 99,626
shares of the Company’s common stock underlying RSUs issued to directors vested, but the issuance and delivery of these shares
are deferred until the director resigns.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Issuances During the Year Ended December
31, 2019</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In March 2019, the Company issued 15,000 shares
of its restricted common stock, with a fair value of $75, as consideration for commission expenses incurred during the year ended
December 31, 2018.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2019, the
Company issued 27,671 shares of its common stock upon the cashless exercise of 82,929 options to purchase common stock, with exercise
prices ranging from $1.70 to $4.17 per share, net of 8,806 shares of common stock withheld for payroll tax withholdings totaling
$50.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2019, the
Company issued 2,122 shares of its common stock upon the exercise of 2,122 options to purchase common stock, with exercise prices
ranging from $1.70 to $3.20 per share, and received net proceeds of $6.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2019, the
Company issued 688,473 shares of its common stock upon the cashless exercise of 964,532 warrants to purchase common stock with
an exercise price of $1.79 per share.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2019, the
Company issued 454,055 shares of its common stock upon the exercise of 454,055 warrants to purchase common stock with an exercise
price of $1.79 per share, and received net proceeds of $813.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2019, 87,610
shares of the Company’s common stock underlying RSUs issued to directors vested, but the issuance and delivery of these shares
are deferred until the director resigns.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Preferred Stock </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2019 and 2018, the Company
had 5,000,000 shares of preferred stock, $0.001 par value, authorized and no shares of preferred stock issued and outstanding.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"><b>Stock Option
Plan </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On September 17, 2007, the Company’s
Board of Directors and stockholders adopted the Company’s 2007 Incentive Stock and Awards Plan, which was subsequently amended
on November 5, 2008, February 26, 2012, July 18, 2012, May 2, 2013 and September 27, 2013 (as amended, the “2007 Plan”).
The 2007 Plan reached its term in September 2017, and we can no longer issue additional awards under this plan, however, options
previously issued under the 2007 Plan will remain outstanding until they are exercised, reach their maturity or are otherwise cancelled/forfeited.
On June 13, 2017, the Company’s Board of Directors and stockholders adopted the Company’s 2017 Incentive Stock and
Awards Plan (the “2017 Plan” together with the 2007 Plan, the “Plans”). As of December 31, 2019, the 2017
Plan provides for the issuance of a maximum of 2,000,000 shares of the Company’s common stock. The purpose of the Plans are
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 Plans, the Company is authorized to issue incentive stock options intended to qualify under Section 422 of the
Internal Revenue Code, non-qualified stock options, restricted stock units and restricted stock. The Plans are administered by
the Compensation Committee of the Company’s Board of Directors. The Company had 1,004,656 shares available for future issuances
under the 2017 Plan at December 31, 2019.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Stock Options</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">A summary of stock option activity under the Plan for the year ended
December 31, 2019 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Number of shares</font></td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted Avg. Exercise Price</font></td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted Avg. Remaining Contractual Life</font></td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Aggregate Intrinsic Value</font></td>
<td style="padding-bottom: 1.5pt; text-align: center"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 44%"><font style="font-size: 10pt">Options outstanding - January 1, 2019</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"><font style="font-size: 10pt">2,482,009</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 11%; text-align: right"><font style="font-size: 10pt">5.09</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"> </td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Options granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">362,000</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">6.19</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Options exercised</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(85,051</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.56</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Options cancelled/forfeit</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(102,275</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">4.67</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Options outstanding - December 31, 2019</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,656,683</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">5.31</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.05</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">7,011</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Options exercisable</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,603,530</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">4.57</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.72</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">5,552</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Options vested and expected to vest</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,558,998</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">5.26</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.10</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">6,911</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The aggregate intrinsic value in the table
above represents the total pre-tax amount of the proceeds, net of exercise price, which would have been received by option holders
if all option holders had exercised and immediately sold all options with an exercise price lower than the market price on December
31, 2019, based on the closing price of the Company’s common stock of $7.78 on that date.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The intrinsic value of the options exercised
in 2019 was $246.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During 2019 and 2018, the Company granted stock
options to certain employees, directors and consultants. The stock options were granted with an exercise price equal to the current
market price of the Company’s common stock, as reported by the securities exchange on which the common stock was then listed,
at the grant date and have contractual terms ranging from five to ten years. Vesting terms for options granted in 2019 and 2018
to employees and consultants typically included one of the following vesting schedules: 25% of the shares subject to the option
vest and become exercisable on the first anniversary of the grant date and the remaining 75% of the shares subject to the option
vest and become exercisable quarterly in equal installments thereafter over three years; quarterly vesting over three years; and
90% of the shares subject to the option vest and become exercisable on the second month after the grant date and the remaining
10% of the shares subject to the option vest and become exercisable quarterly in equal installments thereafter over the next 11
months. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plan) and in the
event of certain modifications to the option award agreement.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The fair value of each option award is estimated
on the date of grant using the Black-Scholes-Merton option pricing model. Beginning on April 1, 2018, the Company began calculating
expected volatility based solely on the historical volatilities of the common stock of the Company. In the past, the expected volatility
was based on the historical volatilities of the common stock of the Company and comparable publicly traded companies, the Company
previously utilized this methodology based on its estimate that it had limited relevant historical data regarding the volatility
of its stock price on which to base a meaningful estimate of expected volatility. The expected volatility is based on the historical
volatilities of the common stock of the Company and comparable publicly traded companies based on the Company’s belief that
it currently has limited relevant historical data regarding the volatility of its stock price on which to base a meaningful estimate
of expected volatility. The expected term of options granted was determined in accordance with the “simplified approach,”
as the Company has limited, relevant, historical data on employee exercises and post-vesting employment termination behavior. The
expected risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option
in effect at the time of the grant. The financial statement effect of forfeitures is estimated at the time of grant and revised,
if necessary, if the actual effect differs from those estimates. For option grants to employees and directors, the Company assigns
a forfeiture factor of 10%. These factors could change in the future, which would affect the determination of stock-based compensation
expense in future periods. Utilizing these assumptions, the fair value is determined at the date of grant.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below illustrates the fair value
per share determined using the Black-Scholes-Merton option pricing model with the following assumptions used for valuing options
granted to employees:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2019</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 66%"><font style="font-size: 10pt">Weighted-average fair value of options granted</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 14%; text-align: right"><font style="font-size: 10pt">3.72</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 14%; text-align: right"><font style="font-size: 10pt">1.42</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Expected terms (in years)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.07 - 7.00</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.77 - 6.11</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Expected volatility</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">64 - 78</font></td>
<td><font style="font-size: 10pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">76 - 126</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Risk-free interest rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.83 – 2.68</font></td>
<td><font style="font-size: 10pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2.05 – 3.00</font></td>
<td><font style="font-size: 10pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Dividend yield</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in">The following
table summarizes information about stock options outstanding and exercisable at December 31, 2019:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-indent: -0.75in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Weighted</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Average</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Weighted</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Weighted</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Remaining</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Average</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Average</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Number</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Contractual</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Exercise</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Number</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Exercise</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Range of Exercise Prices</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Life in Years</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Price</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Exercisable</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Price</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 35%"><font style="font-size: 10pt">$1.47 - $2.60</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">781,940</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">6.66</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">2.05</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">619,016</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">2.10</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">$3.04 - $4.50</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">458,622</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">6.09</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.96</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">440,124</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.98</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">$5.49 - $6.36</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">440,350</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">7.91</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">6.15</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">178,619</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">6.08</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">$6.64 - $8.99</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">970,741</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1.99</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">8.01</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">360,741</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">8.24</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">$42.80</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5,030</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.62</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">42.80</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5,030</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">42.80</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$1.47 - $42.80</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,656,683</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">5.05</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">5.31</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,603,530</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">4.57</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-indent: -0.75in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2019, there was approximately
$3,848 of total unrecognized compensation expense related to unvested stock options granted under the Plan. That expense is expected
to be recognized over the weighted-average remaining vesting period of 1.37 years. The stock-based compensation for all stock options
was $889 and $1,317 during the years ended December 31, 2019 and 2018, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-indent: -0.75in"><b>Restricted Stock Units </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">RSU awards are granted subject to certain vesting
requirements and other restrictions, including performance and market based vesting criteria. The grant-date fair value of the
RSUs, which has been determined based upon the market value of the Company’s common stock on the grant date, is expensed
over the vesting period of the RSUs. Unvested portions of RSUs issued to consultants are remeasured on an interim basis until vesting
criteria is met.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Grants During the Year Ended December 31,
2018</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2018, the
Company granted an aggregate of 136,360 RSUs to its non-employee directors valued at $300. These RSUs vest in equal quarterly installments
over a one-year period subject to the director’s continued service at the vesting date, but the issuance and delivery of
these shares are deferred until the director resigns.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of the Company’s RSU activity
and related information for the year ended December 31, 2018 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Number of RSUs</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Average Grant Date</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Fair Value</p></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">RSUs unvested - January 1, 2018</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,298,946</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">2.42</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">RSUs granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">136,360</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2.20</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">RSUs vested</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(159,626</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.94</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">RSUs cancelled/forfeit</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">RSUs unvested at December 31, 2018</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,275,680</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2.16</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Grants During the Year Ended December 31, 2019</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2019, 185,000
RSUs with a fair market value of $1,139 were issued to certain employees; the RSUs vest in full on the third anniversary of the
grant date.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2019, the
Company’s board of directors were granted 38,860 RSUs with a fair market value $300 which vests on a quarterly basis, over
one year in equal installments, subject to the director’s continued service at the vesting date, but the issuance and delivery
of these shares are deferred until the director resigns.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of the Company’s RSU activity
and related information for the year ended December 31, 2019 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Number of RSUs</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Average Grant Date</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Fair Value</p></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">RSUs unvested - January 1, 2019</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,275,680</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">2.16</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">RSUs granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">223,860</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">6.43</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">RSUs vested</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(87,610</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.42</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">RSUs cancelled/forfeit</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">RSUs unvested at December 31, 2019</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,411,930</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2.76</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2019, the total unrecognized
compensation expense related to unvested RSUs was approximately $1,031 which is expected to be recognized over a weighted-average
period of 0.3 years, based on estimated vesting schedules. The stock-based compensation for RSUs was $879 and $1,149 during the
years ended December 31, 2019 and 2018, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"><b>Subsidiary
Stock-Based Transactions</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Surface Pharmaceuticals, Inc. and Melt Pharmaceuticals,
Inc. – 2018</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2018 the
Company recognized $21 in stock-based compensation related to equity instruments granted by Surface and Melt to consultants, the
Company’s employees and directors, including its CEO, Mark Baum, CFO, Andrew Boll, and a director, Richard Lindstrom.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Mayfield Pharmaceuticals, Inc. - 2019</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Mayfield issued 1,000,000 shares of its common
stock to Elle in connection with acquisition of certain drug candidate intellectual property and rights in February 2019.</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">Mayfield issued 300,000 shares of its common
stock to TGV in connection with acquisition of certain drug candidate intellectual property and rights in July 2019.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2019, the
Company recognized $26 in stock-based compensation related to equity instruments granted by Mayfield for 2,450,000 shares of its
restricted common stock that vest upon various performance based milestones and service periods to consultants of Mayfield, including
Mayfield’s CEO candidate and to Harrow employees, including 725,000 shares to Mark Baum, CEO of the Company, and 362,500
shares to Andrew Boll, CFO of the Company.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Stowe Pharmaceuticals, Inc. - 2019</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2019, Stowe agreed to issue 1,750,000
shares of its common stock to TGV in connection with acquisition of certain drug candidate intellectual property and rights.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recorded stock-based compensation
(including issuance of common stock for services and accrual for stock-based compensation) related to equity instruments granted
to employees, directors and consultants as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">Employees – selling, general and administrative</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,464</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">2,251</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Directors – selling, general and administrative</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">300</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">235</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Consultants - selling general and administrative</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">259</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">150</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,023</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,636</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Warrants</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">From time to time, the Company issues warrants
to purchase shares of the Company’s common stock to investors, lenders (see Note 12), underwriters and other non-employees
for services rendered or to be rendered in the future.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">A summary of warrant activity during the year ended December 31,
2019 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Number of Shares Subject to Warrants Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted Avg. Exercise Price</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 62%"><font style="font-size: 10pt">Warrants outstanding - January 1, 2019</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">2,206,973</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">1.91</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Exercised</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(1,418,587</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">1.79</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Expired</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(8,000</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">1.79</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Warrants outstanding and exercisable - December 31, 2019</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">780,386</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2.12</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Weighted average remaining contractual life of the outstanding warrants in years - December 31, 2019</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">4.53</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">All warrants outstanding as of December 31, 2019 are included in
the following table:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="9" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Warrants Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Warrants Exercisable</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Warrants</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Exercise</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Warrants</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Expiration</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Warrant Series</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Issue Date</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Outstanding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Price</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Exercisable</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Date</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 32%"><font style="font-size: 10pt">Lender warrants</font></td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"><font style="font-size: 10pt">5/11/2015</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"><font style="font-size: 10pt">125,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 11%; text-align: right"><font style="font-size: 10pt">1.79</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"><font style="font-size: 10pt">125,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"><font style="font-size: 10pt">5/11/2025</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Settlement warrants</font></td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8/16/2016</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">40,000</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">3.75</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">40,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8/16/2021</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Lender warrants (see Note 12)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">7/19/2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">615,386</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2.08</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">615,386</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">7/19/2024</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">780,386</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2.12</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">780,386</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
false
-74043000
-74211000
26000
24000
800000
800000
12284000
11901000
2117000
2283000
7702000
6250000
332000
2227000
2337000
3059000
746000
45000
340000
1205000
1000
5375000
6375000
1308000
837000
3301000
1834000
2009000
1914000
20623129
24339610
3500000
25526931
3500000
6559000
629000
99626
2364889
910273
4140000
688473
300000
1750000
27671
2122
454055
87610
2000000
0.10
3848000
1031000
P1Y4M13D
P3M19D
0.0000
0.00
true
25200000
21420000
-1889000
2619000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Segment net revenues, segment operating expenses
and segment contribution information consisted of the following for the year ended December 31, 2019:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">For the Year Ended December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Pharmaceutical</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Pharmaceutical</font></td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Compounding</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Drug Development</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Total</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 41%"><font style="font-size: 10pt">Net revenues</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; text-align: right"><font style="font-size: 10pt">51,165</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; text-align: right"><font style="font-size: 10pt">      -</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 14%; text-align: right"><font style="font-size: 10pt">51,165</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Cost of sales</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(16,749</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(16,749</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Gross profit</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">34,416</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">34,416</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Operating expenses:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Selling, general and administrative</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">24,468</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">174</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">24,642</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Research and development</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,006</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">361</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,367</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Segment contribution</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">8,942</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(535</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$ </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">8,407</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Corporate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8,245</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Research and development</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">716</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Amortization</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">209</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Asset sales and impairments, net</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,040</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Operating loss</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(4,803</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="margin: 0pt"></p>
-4148000
-393000
-62000
90000
57000
119000
10200
4500
25000
5500
5500
0.10
0.14
0.10
0.10
0.73
0.51
6.00
7.20
5.00
5.00
3.30
3.30
8407000
8942000
-535000
209000
630000
103000
101728000
98938000
234000
150000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 4. INVESTMENT IN MELT PHARMACEUTICALS,
INC. AND AGREEMENTS - RELATED PARTY TRANSACTIONS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2018, the Company entered into
an asset purchase agreement with Melt (the “Melt Asset Purchase Agreement”). Pursuant to the terms of the Melt Asset
Purchase Agreement, Melt was assigned certain intellectual property and related rights from the Company to develop, formulate,
make, sell, and sub-license certain Company conscious sedation and analgesia related formulations (collectively, the “Melt
Products”). Under the terms of the Melt Asset Purchase Agreement, Melt is required to make royalty payments to the Company
of 5% of net sales of the Melt Products while any patent rights remain outstanding, as well as other conditions. In January and
March 2019, the Company entered into the Melt Series A Preferred Stock Agreement, see also Note 2, under the subheading <i>Investment
in Melt Pharmaceuticals, Inc</i>.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2019, the Company and Melt entered
into a Management Services Agreement (the “Melt MSA”), whereby the Company provides to Melt certain administrative
services and support, including bookkeeping, web services and human resources related activities, and Melt pays the Company a monthly
amount of $10.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2019, the Company was due
$722 from Melt for reimbursable expenses and amounts due under the Melt MSA and included in prepaid expenses and other current
assets on the accompanying consolidated balance sheets. During the year ended December 31, 2019, Melt paid the Company $50.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s Chief Executive Officer,
Mark L. Baum, and Chief Medical Officer, Larry Dillaha, are members of the Melt board of directors, and several employees of the
Company (including Mr. Baum, Mr. Dillaha and the Company’s Chief Financial Officer, Andrew Boll) entered into consulting
agreements and provide consulting services to Melt.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The unaudited condensed results of operations information of Melt
is summarized below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>For the</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>Year Ended</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2019</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Revenues, net</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 61%; padding-bottom: 1.5pt"><font style="font-size: 10pt">Loss from operations</font></td>
<td style="width: 3%; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; width: 1%"> </td>
<td style="border-bottom: black 1.5pt solid; width: 34%; text-align: right"><font style="font-size: 10pt">4,169</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Net loss</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(4,169</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The unaudited condensed balance sheet information
of Melt is summarized below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2019</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 67%"><font style="font-size: 10pt">Current assets</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 30%; text-align: right"><font style="font-size: 10pt">7,440</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Non current  assets</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">13</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total assets</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,453</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total liabilities</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">1,656</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Total preferred stock and stockholders’ equity</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5,797</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total liabilities and stockholders’ equity</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,453</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Investment in Eton Pharmaceuticals, Inc.
</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2017, the Company formed Eton as a
wholly owned subsidiary. In June 2017 the Company lost voting and ownership control of Eton and it ceased consolidating Eton’s
financial statements. At the time of deconsolidation, the Company recorded a gain of $5,725 and adjusted the carrying value in
Eton to reflect the increased valuation of Eton and the Company’s new ownership percent in accordance with ASC 810-10-40-4(c),
<i>Consolidation</i>. At the time of deconsolidation, the Company used the equity method of accounting as management determined
that the Company had the ability to exercise significant influence over the operating and financial decisions of Eton. Under this
method, the Company recognized earnings and losses of Eton in its consolidated financial statements and adjusted the carrying amount
of its investment in Eton accordingly. During the years ended December 31, 2019 and 2018, the Company recorded equity in net loss
of Eton of $0 and $3,507, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In November 2018, Eton closed on an initial
public offering of 4,140,000 shares of its common stock at $6.00 per share for gross proceeds of approximately $24,800 (the “Eton
IPO”). Following the close of the Eton IPO, the Company estimated its common stock position in Eton equaled 19.98% of the
equity and voting interests issued and outstanding of Eton, and it ceased using the equity method of accounting for its investment
in Eton. The Company recognizes earnings and losses of Eton in its consolidated financial statements based on the fair market value
of the shares owned and adjust the carrying amount of the Company’s investment in Eton accordingly. Eton’s common stock
currently trades on the NASDAQ Global Market exchange. At December 31, 2019, the fair market value of Eton’s common stock
was $7.20 per share, the closing share price of Eton common stock on that day. In accordance with Accounting Standards Update (“ASU”)
2016-01, <i>Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities</i>,
for the year ended December 31, 2019, the Company recorded an investment gain from its Eton common stock position of $3,780 related
to the change in fair market value of the Company’s investment in Eton during the measurement period. For the year ended
December 31, 2018, the Company recorded an investment gain from its Eton common stock position of $21,420 related to the change
in fair market value of the Company’s investment in Eton during the measurement period. As of December 31, 2019, the fair
market value of the Company’s investment in Eton was $25,200.</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">Eton and the Company signed licensing agreements
for two products developed by the Company whereby the Company assigned the product rights to Eton. Eton would pay the Company a
$50 milestone payment upon patent issuance for each product and a royalty fee at a rate of six percent on the net sales of those
two products. On December 26, 2017, one of the products had its patent issued and a $50 milestone fee was received by the Company
in January 2018. In July 2018, Eton and the Company agreed to cancel the licensing agreement for one of the products and retain
the product rights at the Company, in exchange of the Company paying Eton $50.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 6, 2019, the Company entered into an
Asset Purchase Agreement (the “CT-100 Asset Purchase Agreement”) with Eton. Pursuant to the CT-100 Asset Purchase Agreement,
Eton sold all of its right, title and interest in CT-100 back to the Company. Pursuant to the CT-100 Asset Purchase Agreement,
the Company will make certain payments to Eton upon the achievement of certain development and commercial milestones. In addition,
the Company is required to pay Eton a royalty in the low-single digit percentage range worldwide on a country-by-country basis
on net sales for a period of the longer of 15 years from the date of the first commercial sale of a product subject to certain
conditions.</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">Mark L. Baum, the Company’s Chief Executive
Officer is a member of the Eton board of directors.</p>
200000
200000
1936000
1608000
4.57
P5Y18D
6338000
26000
-293000
27418000
24751000
21000
24000
91430000
98938000
-88836000
-74211000
2615000
26000
101728000
-74043000
2615000
24751000
27711000
-293000
21420000
4947000
17913000
-1200000
3780000
3968000
3780000
293000
-125000
14625000
14625000
168000
14625000
168000
-293000
813000
3000
4230000
4233000
2000
811000
4233000
813000
3275162
1142528
1789000
2486000
2486000
1789000
2486000
1789000
60000
305619
4949000
6838000
4000
369000
435000
642000
642000
642000
12219000
11999000
12219000
31667000
24700000
165000
619000
1656000
0.30
0.44
0.70
0.70
0.30
0.30
0.30
0.1998
4848459
6201355
236693
324303
25200000
11400000
11400000
21000000
21000000
6967000
950000
687000
0.05
0.03
0.04
0.06
722000
50000
47000
13000
10000
10000
2405000
1119000
20000
6000
876000
709000
123000
328000
358000
334000
50000
722000
105000
125000
1732000
1662000
363000
397000
3164000
3184000
5510000
5496000
10769000
10739000
5394000
4364000
P20Y
P20Y
P5Y
P17Y
P19Y
P3Y
P15Y
P3Y
P4Y
P25Y
Indefinite
4847000
1102000
50000
340000
3000000
16000
294000
45000
1564000
97000
5000
1165000
14000
274000
9000
-946000
-259000
-630000
-2000
-20000
-35000
2337000
187000
187000
187000
159000
1430000
7409000
4966000
388000
244000
256000
8502000
7050000
4121000
3828000
7573000
19225000
3975000
15250000
13991000
P5Y
P10Y2M16D
905000
892000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Future lease payments under non-cancelable
finance leases as of December 31, 2019 were as follows<b>: </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Finance Lease</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 82%"><font style="font-size: 10pt">2020</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">9</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">9</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2022</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">9</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2023</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">9</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">2024</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Total minimum lease payments</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">37</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: amount representing interest payments</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(4</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Present value of future minimum lease payments</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">33</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: current portion, finance lease obligation</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(7</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Finance lease obligation, net of current portion</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">26</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
1000000
743000
691000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Segments</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s chief operating decision-maker
is its Chief Executive Officer who makes resource allocation decisions and assesses performance based on financial information
presented on as operating segments. The Company has identified two operating segments as reportable segments. See Note 18 for
more information regarding the Company’s reportable segments.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Noncontrolling Interests</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 recognizes any noncontrolling interest
as a separate line item in equity in the consolidated financial statements. A noncontrolling interest represents the portion of
equity ownership in a less-than-wholly owned subsidiary not attributable to the Company. Generally, any interest that holds less
than 50% of the outstanding voting shares is deemed to be a noncontrolling interest; however, there are other factors, such as
decision-making rights, that are considered as well. The Company includes the amount of net income (loss) attributable to noncontrolling
interests in consolidated net income (loss) on the face of the consolidated statements of operations.</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 provides in the consolidated statements
of stockholders’ equity a reconciliation at the beginning and the end of the period of the carrying amount of total equity,
equity attributable to the parent, and equity attributable to the noncontrolling interest that separately discloses:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 24px"> </td>
<td style="width: 24px"><font style="font-size: 10pt">(1)</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">net income or loss;</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">(2)</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners; and</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">(3)</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">each component of other income or loss.</font></td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Future lease payments under operating leases
as of December 31, 2019 were as follows<b>: </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Operating Leases</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 82%"><font style="font-size: 10pt">2020</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">1,095</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">978</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2022</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">998</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2023</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,023</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2024</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,023</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Thereafter</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,465</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total minimum lease payments</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">9,582</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Less: amount representing interest payments</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(2,615</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Total operating lease liabilities</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">6,967</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Less: current portion, operating lease liabilities</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(629</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Operating lease liabilities, net of current portion</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6,338</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Investment in Melt Pharmaceuticals, Inc.</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2018, the Company formed Melt as a
wholly owned subsidiary. In January and March of 2019, Melt entered into definitive stock purchase agreements (collectively, the
“Melt Series A Preferred Stock Agreement”) with certain investors and closed on the purchase and sale of Melt’s
Series A Preferred Stock (the “Melt Series A Stock”), totaling approximately $11,400 of proceeds (collectively the
“Melt Series A Round”) at a purchase price of $5.00 per share. As a result, the Company lost voting and ownership control
of Melt and ceased consolidating Melt’s financial statements. In connection with the Melt Series A Preferred Stock Agreement,
Melt also entered into a Registration Rights Agreement and agreed to use commercially reasonable efforts to file, or confidentially
submit, a registration statement on Form S-1 with the United States Securities and Exchange Commission by September 30, 2020 relating
to an initial public offering of its common stock.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At the time of deconsolidation, the Company
recorded a gain of $5,810 and adjusted the carrying value in Melt to reflect the increased valuation of Melt and the Company’s
new ownership interest in accordance with ASC 810-10-40-4(c), <i>Consolidation</i>.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company owns 3,500,000 common shares (which
is approximately 44% of the equity interest as of December 31, 2019) of Melt and uses the equity method of accounting for this
investment, as management has determined that the Company has the ability to exercise significant influence over the operating
and financial decisions of Melt. Under this method, the Company recognizes earnings and losses of Melt in its consolidated financial
statements and adjusts the carrying amount of its investment in Melt accordingly. The Company’s share of earnings and losses
are based on the Company’s ownership interest of Melt. Any intra-entity profits and losses are eliminated. During the year
ended December 31, 2019, the Company recorded equity in net loss of Melt of $1,842. As of December 31, 2019, the carrying value
of the Company’s investment in Melt was $3,968.</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">See Note 4 for more information and related
party disclosure regarding Melt.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Investment in Surface Pharmaceuticals, Inc.</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2017, the Company formed Surface as
a wholly owned subsidiary. In May and July 2018, Surface entered into and closed on definitive stock purchase agreements with an
institutional investor for the purchase of Surface’s Series A Preferred Stock (the “Surface Series A Stock”)
that resulted in total proceeds to Surface of approximately $21,000. At the time of the first closing in May 2018, the Company
lost voting and ownership control of Surface and it ceased consolidating Surface’s financial statements. The Surface Series
A Stock (i) was issued at a purchase price of $3.30 per share; (ii) will vote together with the common stock and all other shares
of stock of Surface having general voting power; (iii) will be entitled to the number of votes equal to the number of shares of
preferred stock held; (iv) will hold liquidation preference over all other equity interests in Surface; and (v) will have mandatory
conversion requirements into Surface common stock upon events including an underwritten initial public offering of Surface common
stock or similar transaction.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At the time of deconsolidation, the Company
recorded a gain of $5,320 and adjusted the carrying value in Surface to reflect the increased valuation of Surface and the Company’s
new ownership percent in accordance with ASC 810-10-40-4(c).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company owns 3,500,000 common shares (which
is approximately 30% of the equity interest as of December 31, 2019, and calculated after the second closing of the sale Series
A Preferred Stock in July 2018) of Surface and uses the equity method of accounting for this investment, as management has determined
that the Company has the ability to exercise significant influence over the operating and financial decisions of Surface. Under
this method, the Company recognizes earnings and losses of Surface in its consolidated financial statements and adjusts the carrying
amount of its investment in Surface accordingly. The Company’s share of earnings and losses are based on the shares of common
stock and in-substance common stock of Surface held by the Company. Any intra-entity profits and losses are eliminated. During
the years ended December 31, 2019 and 2018, the Company recorded equity in net loss of Surface of $1,200 and $373, respectively.
As of December 31, 2019, the carrying value of the Company’s investment in Surface was $3,747.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">See Note 5 for more information and related
party disclosure regarding Surface.</p>
Generally, any interest that holds less than 50% of the outstanding voting shares is deemed to be a noncontrolling interest; however, there are other factors, such as decision-making rights, that are considered as well.
2021-12-31
2020-12-31
2024-07-31
2024-12-31
The Company has elected to not recognize right-of-use assets and lease liabilities arising from short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
Term for a five-year period
Term for up to two five-year periods
Term for two additional five-year periods.
Term for two additional five-year periods.
9000
9000
9000
1000
37000
751000
33000
720000
50000
100000
750000
4000
16000
7000
720000
720000
150000
18000
978000
857000
998000
742000
1023000
320000
1023000
330000
4465000
196000
9582000
3242000
In consideration for the acquisition of the intellectual property rights, the Company is obligated to make payments to the Inventors based on the completion of certain milestones, generally consisting of: (1) a payment payable within 30 days after the issuance of the first patent in the United States arising from the acquired intellectual property (if any); (2) a payment payable within 30 days after the Company files the first investigational new drug application ("IND") with the FDA for the first product arising from the acquired intellectual property (if any); (3) for certain of the Inventors, a payment payable within 30 days after the Company files the first new drug application with the FDA for the first product arising from the acquired intellectual property (if any); and (4) certain royalty payments based on the net receipts received by the Company in connection with the sale or licensing of any product based on the acquired intellectual property (if any), after deducting (among other things) the Company's development costs associated with such product. If, following five years after the date of the applicable asset purchase agreement, the Company either (a) for certain of the Inventors, has not filed an IND or, for the remaining Inventors, has not initiated a study where data is derived, or (b) has failed to generate royalty payments to the Inventors for any product based on the acquired intellectual property, the Inventors may terminate the applicable asset purchase agreement and request that the Company re-assign the acquired technology to the Inventors.
Yes
Yes
false
75700
15000
234000
150000
150000
234000
150000
234000
29793
44000
44000
44000
282000
4949000
6838000
4219000
5000000
16000000
282000
Vesting terms for options granted in 2019 and 2018 to employees and consultants typically included one of the following vesting schedules: 25% of the shares subject to the option vest and become exercisable on the first anniversary of the grant date and the remaining 75% of the shares subject to the option vest and become exercisable quarterly in equal installments thereafter over three years; quarterly vesting over three years; and 90% of the shares subject to the option vest and become exercisable on the second month after the grant date and the remaining 10% of the shares subject to the option vest and become exercisable quarterly in equal installments thereafter over the next 11 months. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plan) and in the event of certain modifications to the option award agreement.
7.78
2025-05-11
2021-08-16
2024-07-19
P4Y6M10D
1.91
2.12
1.79
0.014
49000
1511000
2700000
0.50
1095000
797000
85051
82929
2122
2615000
4040000
4000
769000
4233000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Park Restructuring</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2019, the Company’s subsidiary,
Park Compounding, Inc. (“Park”), and Noice Rx, LLC (“Noice”) terminated an Asset Purchase Agreement dated
July 26, 2019 (the “Park Purchase Agreement”), between the parties. Under the terms of the Park Purchase Agreement,
Park had agreed to sell substantially all its assets associated with its non-ophthalmology pharmaceutical compounding business
to Noice, including its pharmacy facility and equipment located in Irvine, California. The closing of the sale transaction was
dependent on the California State Board of Pharmacy approving of the sale and issuing a temporary pharmacy and sterile license
permit to Noice, which did not occur and led to Park ceasing operations at the close of business on August 27, 2019. As a result,
the Company restructured its Park business, ceased operations at its Irvine, California-based pharmacy, and facilitated the transition
of certain compounded formulations and related equipment from Park to the Company’s New Jersey-based compounded pharmaceutical
production facilities (the “Park Restructuring”). As a result of the Park Restructuring, the Company incurred non-cash
impairment costs of approximately $3,781 related to assets held at Park, primarily associated with property, plant, equipment,
inventory, goodwill and other intangible assets, and $480 in one-time costs related to severance packages and other costs associated
with the Park Restructuring during the year ended December 31, 2019.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has reduced the Park compounded
product formulary to seven base formulations, based on factors including unit order volumes, revenues and gross margin percentages,
and ImprimisRx expects to have re-acquired approximately half of Park’s historical revenues during the first quarter of
2020.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Changes in the carrying value of the Company’s
goodwill during the year ended December 31, 2019 were:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 82%"><font style="font-size: 10pt">Balance at December 31, 2018</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">2,227</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Impairment of Park goodwill (see Note 2)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(1,895</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Balance at December 31, 2019</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">332</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
We consolidate subsidiaries in which we hold and/or control, directly or indirectly, more than 50% of the voting rights.
3781000
480000
50000
50000
612000
259000
1895000
640000
571000
1576665
454055
964532
1004656
25526931
0.0200
0.1000
0.0150
0.0300
0.1050
0.0636
P4Y29D
0.063
6325000
753000
6712000
753000
8806
50000
725000
362500
No
No
205000000
4040000
-393000
-125000
14625000
0.01
0.67
0.01
0.61
25323159
21917570
26466098
23812045
753000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-indent: -0.75in"><b>NOTE 1. ORGANIZATION</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-indent: -0.75in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Harrow Health, Inc. (together with its subsidiaries,
partially owned companies and royalty arrangements unless the context indicates or otherwise requires, the “Company”
or “Harrow”) specializes in the development, production and sale of innovative medications that offer unique competitive
advantages and serve unmet needs in the marketplace through its subsidiaries and deconsolidated companies. The Company owns one
of the nation’s leading ophthalmology pharmaceutical businesses, ImprimisRx. In addition to wholly owning ImprimisRx, the
Company also has equity positions in Eton Pharmaceuticals, Inc. (“Eton”), Surface Pharmaceuticals, Inc. (“Surface”),
and Melt Pharmaceuticals, Inc. (“Melt”), all companies that began as subsidiaries of Harrow. More recently, the Company
founded drug development subsidiaries Mayfield Pharmaceuticals, Inc. (“Mayfield”), Radley Pharmaceuticals, Inc. (“Radley”),
and Stowe Pharmaceuticals, Inc. (“Stowe”). Harrow also owns royalty rights in various drug candidates being developed
by Surface, Melt, Radley and Mayfield. The Company intends to continue to create, and hold equity and royalty rights in, new businesses
that commercialize drug candidates that are internally developed or otherwise acquired or licensed from third parties.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2018, the Company amended its
restated certificate of incorporation to change its corporate name from “Imprimis Pharmaceuticals, Inc.” to “Harrow
Health, Inc.”.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 6. RESTRICTED CASH </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The restricted cash at December 31, 2019 and
2018 consisted of funds held in a money market account. At December 31, 2019 and 2018, the restricted cash was recorded at amortized
cost, which approximates fair value.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2019 and 2018, the funds held
in a money market account of $200 were classified as a current asset. The money market account funds are required as collateral
as additional security for the Company’s New Jersey facility lease.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 15. INCOME TAXES </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-indent: -0.75in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company is subject to taxation in the United
States, California, New Jersey, Texas and Pennsylvania. The provision for income taxes for the years ended December 31, 2019 and
2018 are summarized below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2019</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2018</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Current:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Federal</font></td>
<td> </td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td>
<td> </td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 46%; padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">State</font></td>
<td style="width: 1%"> </td>
<td style="border-bottom: black 1.5pt solid; width: 1%"> </td>
<td style="border-bottom: black 1.5pt solid; width: 24%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">8</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="border-bottom: black 1.5pt solid; width: 1%"> </td>
<td style="border-bottom: black 1.5pt solid; width: 24%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Total current</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">8</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Deferred:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Federal</font></td>
<td> </td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">669</font></td>
<td> </td>
<td> </td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,294</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">State</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(148</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">440</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Change in valuation allowance</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(521</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(3,734</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Total deferred</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Income tax provision (benefit)</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">8</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Income tax expense for the years ended December
31, 2019 and 2018, are recorded in the general and administrative expenses line item in the accompanying consolidated statements
of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A reconciliation of income taxes computed by
applying the statutory U.S. income tax rate to the Company’s loss before income taxes to the income tax provision is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2019</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2018</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 50%"><font style="font: 10pt Times New Roman, Times, Serif">U.S. federal statutory tax rate</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 22%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">21.00</font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 22%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">21.00</font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Benefit of lower tax brackets</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">State tax benefit, net</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(6.73</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.04</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Research and development credits</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.14</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Employee stock-based compensation</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3.10</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.46</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Loss on debt conversion</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Capitalization of Subsidiary</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Change in Rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Other</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(358.67</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.13</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Valuation allowance</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">334.57</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(21.93</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Effective income tax rate</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(6.73</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)%</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.44</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)%</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred tax assets and liabilities reflect
the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2019</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2018</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Deferred tax assets (liabilities):</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 50%; padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">NOLs</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 22%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">19,827</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 22%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">19,726</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Depreciation and amortization</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">224</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">30</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Other</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">640</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">604</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Research and development credits</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">596</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">617</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Deferred stock compensation</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,533</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,036</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Basis Difference in Melt</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,185</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Basis Difference in Surface</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,119</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,464</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Basis Difference in Eton</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(7,528</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(6,340</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Capital Losses</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">62</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Park stock purchase identifiable intangibles</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(270</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(484</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Limitation Under 163(j)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">299</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">ASC 842 Lease Liability</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,082</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">ASC 842 ROU Asset</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,959</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 20pt"><font style="font: 10pt Times New Roman, Times, Serif">Total deferred tax assets, net</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">15,202</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">15,723</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Valuation allowance</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(15,202</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(15,723</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Net deferred tax liabilities</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Realization of deferred tax assets is dependent
upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been
fully offset by a valuation allowance. The valuation allowance decreased by approximately $500 and $3,700 during 2019 and 2018,
respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2019, the Company had net
operating loss carryforwards for federal income tax purposes of approximately $65,874 and federal research and development tax
credits of approximately $354. Under new tax law, federal NOLs can be carried forward indefinitely. The federal research credits
will expire beginning in the year 2026. As of December 31, 2019, the Company had net operating loss carryforwards for state income
tax purposes of approximately $67,538 which expire beginning in the year 2017 and state research and development tax credits of
approximately $305 which do not expire.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In March 2016, the FASB issued ASU 2016-09,
<i>Improvement to Employee Share – Based Payment Accounting</i>. The new standard contains several amendments that will simplify
the accounting for employee share-based payment transactions. The changes in the new standard eliminate the accounting for excess
tax benefits to be recognized in additional paid-in capital and tax deficiencies recognized either in income tax provision or in
additional paid-in capital. The Company’s deferred tax asset at December 31, 2018 did not include any excess tax benefits
from employee stock option exercises, which are a component of the federal and state net operating loss carryforwards and on a
go forward basis the excess tax benefits will be recognized as a component of income tax expense.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Utilization of the net operating losses may
be subject to substantial annual limitation due to federal and state ownership change limitations provided by the Internal Revenue
Code and similar state provisions. Such annual limitations could result in the expiration of the net operating losses ad credits
before their utilization.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In June 2006, the FASB issued interpretation
ASC 740-10-50, <i>Accounting for Uncertainty in Income Tax</i>. This pronouncement clarifies the accounting for uncertainty in
income taxes recognized in an enterprise’s financial statements in accordance with ASC 740-10-50, <i>Accounting for Income
Taxes</i>. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken in the tax return. ASC 740 also provides guidance on derecognition
of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure and transaction.
The Company adopted ASC 740-10-50 effective January 1, 2009. In accordance with ASC 740-10-50, the Company is classifying interest
and penalties as a component of tax expense.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company did not have any unrecognized tax
benefits as of December 31, 2019 and 2018, all of which is offset by a full valuation allowance. These unrecognized tax benefits,
if recognized, would not affect the effective tax rate. There was no interest or penalties accrued at the adoption date and at
December 31, 2019.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A reconciliation of the change in the UTB balance
from January 1, 2019 to December 31, 2019 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Fed & State Tax</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 82%"><font style="font: 10pt Times New Roman, Times, Serif">Balance at January 1, 2019</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 15%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Additions for tax positions related to current year</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Additions/(reductions) for tax positions related to prior years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Balance at December 31, 2019</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>Total unrecognized tax benefits as of December 31, 2019</b></font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-indent: -0.75in"><b>NOTE 16. EMPLOYEE SAVINGS PLAN</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has established an employee savings
plan pursuant to Section 401(k) of the Internal Revenue Code, effective January 1, 2014. The plan allows participating employees
to deposit into tax deferred investment accounts up to 100% of their salary, subject to annual limits. The Company makes certain
matching contributions to the plan in amounts up to 4% of the participants’ annual cash compensation, subject to annual
limits. The Company contributed approximately $312 and $248 to the plan during the years ended December 31, 2019 and 2018, respectively.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Basis of Presentation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Harrow has prepared the accompanying consolidated
financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). The
accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, as well as
Mayfield and Stowe, 70% majority controlled subsidiaries of Harrow as of December 31, 2019. The remaining 30% of Mayfield is owned
by Elle Pharmaceutical, LLC (“Elle”), TGV-Health, LLC and its affiliated entities (collectively “TGV”)
or other consultants. Mayfield was organized to develop women’s health-focused drug candidates. The remaining 30% of Stowe
is owned by TGV. Stowe was organized to develop ophthalmic drug candidates. All inter-company accounts and transactions have been
eliminated in consolidation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Harrow consolidates entities in which we have
a controlling financial interest. We consolidate subsidiaries in which we hold and/or control, directly or indirectly, more than
50% of the voting rights. All intercompany accounts and transactions have been eliminated in consolidation.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Use of Estimates</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of financial statements in
conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and
expenses during the reporting periods. Significant estimates made by management are, among others, allowance for doubtful accounts
and contractual adjustments, renewal periods and discount rates for leases, realizability of inventories, valuation of investments
in equity securities, deferred taxes, goodwill and intangible assets, recoverability of long-lived assets and goodwill, valuation
of contingent acquisition obligations and deferred acquisition obligations, valuation of notes payable, and valuation of stock-based
transactions with employees and non-employees. Actual results could differ from those estimates.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Revenue Recognition and Deferred Revenue</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes revenue at the time
of transfer of promised goods to customers in an amount that reflects the consideration to which the Company expects to be entitled
in exchange for those goods or services (see Note 3).</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Cost of Sales</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cost of sales includes direct and indirect
costs to manufacture formulations and other products sold, including active pharmaceutical ingredients, personnel costs, packaging,
storage, royalties, shipping and handling costs and the write-off of obsolete inventory.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Research and Development</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company expenses all costs related to
research and development as they are incurred. Research and development expenses consist of expenses incurred in performing research
and development activities, including salaries and benefits, other overhead expenses, and costs related to clinical trials, contract
services and outsourced contracts.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Debt Issuance Costs and Debt Discount</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Debt issuance costs and the debt discount
are recorded net of notes payable and finance lease obligations in the consolidated balance sheets. Amortization expense of debt
issuance costs and the debt discount is calculated using the effective interest method over the term of the debt and is recorded
in interest expense in the accompanying consolidated statements of operations.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Intellectual Property</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The costs of acquiring intellectual property
rights to be used in the research and development process, including licensing fees and milestone payments, are charged to research
and development expense as incurred in situations where the Company has not identified an alternative future use for the acquired
rights, and are capitalized in situations where we have identified an alternative future use for the acquired rights. Patents
and trademarks are recorded at cost and capitalized at a time when the future economic benefits of such patents and trademarks
become more certain (see “—Goodwill and Intangible Assets” below). The Company began capitalizing certain costs
associated with acquiring intellectual property rights during 2015; if costs are not capitalized they are expensed as incurred.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Income Taxes</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As part of the process of preparing the Company’s
consolidated financial statements, the Company must estimate the actual current tax liabilities and assess permanent and temporary
differences that result from differing treatment of items for tax and accounting purposes. The temporary differences result in
deferred tax assets and liabilities, which are included within the consolidated balance sheets. The Company must assess the likelihood
that the deferred tax assets will be recovered from future taxable income and, to the extent the Company believes that recovery
is not more likely than not, a valuation allowance must be established which reduces the amount of deferred tax assets recorded
on the consolidated balance sheets. To the extent the Company establishes a valuation allowance or increase or decrease this allowance
in a period, the impact will be included in income tax expense in the consolidated statement of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for income taxes under
the provisions of Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”)
740, <i>Income Taxes</i>. As of December 31, 2019 and 2018, there were no unrecognized tax benefits included in the consolidated
balance sheets that would, if recognized, affect the effective tax rate. The Company’s practice is to recognize interest
and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties in
its consolidated balance sheets at December 31, 2019 and 2018, and has not recognized interest and/or penalties in the consolidated
statements of operations for the years ended December 31, 2019 and 2018. The Company is subject to taxation in the United States,
California, Florida, Georgia, Illinois, New Jersey, New York, Tennessee, and Wisconsin. The Company’s tax years since 2000
may be subject to examination by the federal and state tax authorities due to the carryforward of unutilized net operating losses.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Cash and Cash Equivalents</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </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"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company places its cash with financial
institutions deemed by management to be of high credit quality. The Federal Deposit Insurance Corporation (“FDIC”)
provides basic deposit coverage with limits up to $250 per owner. From time to time the Company has cash deposits in excess of
FDIC limits.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Accounts Receivable</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts receivable are stated net of allowances
for doubtful accounts and contractual adjustments. The accounts receivable balance primarily includes amounts due from customers
the Company has invoiced or from third-party providers (e.g., insurance companies and governmental agencies), but for which payment
has not been received. Charges to bad debt are based on both historical write-offs and specifically identified receivables. Accounts
receivable are presented net of allowances for doubtful accounts and contractual adjustments in the amount of $76 and $270 as
of December 31, 2019 and 2018, respectively.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Inventories</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories are stated at the lower of cost
or net realizable value. Cost is determined on a first-in, first-out basis. The Company evaluates the carrying value of inventories
on a regular basis, based on the price expected to be obtained for products in their respective markets compared with historical
cost. Write-downs of inventories are considered to be permanent reductions in the cost basis of inventories.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company also regularly evaluates its inventories
for excess quantities and obsolescence (expiration), taking into account such factors as historical and anticipated future sales
or use in production compared to quantities on hand and the remaining shelf life of products and active pharmaceutical ingredients
on hand. The Company establishes reserves for excess and obsolete inventories as required based on its analyses.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Property, Plant and Equipment</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property, plant and equipment is stated at
cost less accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-line method
over the estimated useful life of the asset. Leasehold improvements and capital lease equipment are amortized over the estimated
useful life or remaining lease term, whichever is shorter. Computer software and hardware and furniture and equipment are depreciated
over three to five years.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Business Combinations</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for business combinations
by recognizing the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair
values on the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions,
especially with respect to intangible assets, estimated contingent consideration payments and pre-acquisition contingencies. Examples
of critical estimates in valuing certain of the intangible assets the Company has acquired or may acquire in the future include
but are not limited to:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 24px"> </td>
<td style="width: 24px"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">future expected cash flows from product sales, support agreements, consulting contracts, other customer contracts, and acquired developed technologies and patents; and</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td><font style="font-size: 10pt">discount rates utilized in valuation estimates.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Unanticipated events and circumstances may
occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Additionally, any change in the
fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes from events
after the acquisition date, such as changes in our estimates of relevant revenue or other targets, will be recognized in earnings
in the period of the estimated fair value change. A change in fair value of the acquisition-related contingent consideration or
the occurrence of events that cause results to differ from our estimates or assumptions could have a material effect on the consolidated
financial position, statements of operations or cash flows in the period of the change in the estimate.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Goodwill and Intangible Assets</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Patents and trademarks are recorded at cost
and capitalized at a time when the future economic benefits of such patents and trademarks become more certain. At that time, the
Company capitalizes third-party legal costs and filing fees associated with obtaining and prosecuting claims related to its patents
and trademarks. Once the patents have been issued, the Company amortizes these costs over the shorter of the legal life of the
patent or its estimated economic life, generally 20 years, using the straight-line method. Trademarks are an indefinite life intangible
asset and are assessed for impairment based on future projected cash flows as further described below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company reviews its goodwill and indefinite-lived
intangible assets for impairment as of January 1 of each year and when an event or a change in circumstances indicates the fair
value of a reporting unit may be below its carrying amount. Events or changes in circumstances considered as impairment indicators
include but are not limited to the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 48px"> </td>
<td style="width: 24px"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">significant underperformance of the Company’s business relative to expected operating results;</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">significant adverse economic and industry trends;</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">significant decline in the Company’s market capitalization for an extended period of time relative to net book value; and</font></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">expectations that a reporting unit will be sold or otherwise disposed.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-indent: -0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The goodwill impairment test consists of a two-step process as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Step 1. The Company compares the fair value
of each reporting unit to its carrying amount, including the existing goodwill. The fair value of each reporting unit is determined
using a discounted cash flow valuation analysis. The carrying amount of each reporting unit is determined by specifically identifying
and allocating the assets and liabilities to each reporting unit based on headcount, relative revenues or other methods as deemed
appropriate by management. If the carrying amount of a reporting unit exceeds its fair value, an indication exists that the reporting
unit’s goodwill may be impaired and the Company then performs the second step of the impairment test. If the fair value of
a reporting unit exceeds its carrying amount, no further analysis is required.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Step 2. If further analysis is required, the
Company compares the implied fair value of the reporting unit’s goodwill, determined by allocating the reporting unit’s
fair value to all of its assets and its liabilities in a manner similar to a purchase price allocation, to its carrying amount.
If the carrying amount of the reporting unit’s goodwill exceeds its fair value, an impairment loss will be recognized in
an amount equal to the excess.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Impairment of Long-Lived Assets</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Long-lived assets, such as property, plant
and equipment, purchased intangibles subject to amortization and patents and trademarks, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows
expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment
charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be
disposed of would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or
fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale
would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material (See
Note 9).</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Fair Value Measurements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Fair value measurements are determined based
on the assumptions that market participants would use in pricing an asset or liability. GAAP establishes a hierarchy for inputs
used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring
that the most observable inputs be used when available. The established fair value hierarchy prioritizes the use of inputs used
in valuation methodologies into the following three levels:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 24px"><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Level 1: Applies to assets or liabilities for which there are quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Level 2: Applies to assets or liabilities for which there are significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font-size: 10pt">●</font></td>
<td style="text-align: justify"><font style="font-size: 10pt">Level 3: Applies to assets or liabilities for which there are significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. For example, Level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2019 and 2018, the Company
measured its investment in Eton on a recurring basis. The Company’s investment in Eton is classified as Level 1 as the fair
value is determined using quoted market prices in active markets for the same securities. As of December 31, 2019, the fair market
value of the Company’s investment in Eton was $25,200.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s financial instruments
included cash and cash equivalents, investment in Eton, accounts receivable, accounts payable and accrued expenses, accrued payroll
and related liabilities, deferred revenue and customer deposits, notes payable and operating and finance leases. The carrying
amount of these financial instruments, except for notes payable and finance leases, approximates fair value due to the short-term
maturities of these instruments. The Company’s restricted short-term investments are carried at amortized cost, which approximates
fair value. Based on borrowing rates currently available to the Company, the carrying values of the notes payable and operating
and finance leases approximate their respective fair values.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Stock-Based Compensation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">All stock-based payments to employees, directors
and consultants, including grants of stock options, warrants, restricted stock units (“RSUs”) and restricted stock,
are recognized in the consolidated financial statements based upon their estimated fair values. The Company uses the Black-Scholes-Merton
option pricing model and Monte Carlo Simulation to estimate the fair value of stock-based awards. The estimated fair value is
determined at the date of grant. The financial statement effect of forfeitures is estimated at the time of grant and revised,
if necessary, if the actual effect differs from those estimates.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows the computation of
basic net income per share of common stock for the years ended December 31, 2019 and 2018:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td>
<td> </td>
<td colspan="2" style="text-align: right"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 50%; padding-bottom: 2.5pt"><font style="font-size: 10pt">Numerator – net income</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double; width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; width: 22%; text-align: right"><font style="font-size: 10pt">168</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double; width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; width: 22%; text-align: right"><font style="font-size: 10pt">14,625</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Denominator – weighted average number of shares outstanding, basic</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">25,323,159</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">21,917,570</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Net income per share, basic</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.01</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.67</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the years end December 31, 2019 and 2018,
the Company computed diluted net income per share using the weighted-average number of common shares and dilutive common equivalent
shares outstanding during that period. Diluted common equivalent shares for the years ended December 31, 2019 and 2018, respectively,consisted
of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Shares</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Shares</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 62%"><font style="font-size: 10pt">Diluted shares related to:</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">25,323,159</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">21,917,570</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Warrants</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">488,498</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,844,272</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Stock options</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">654,441</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">50,203</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Dilutive common equivalent shares</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">26,466,098</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">23,812,045</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows the computation of
diluted net income per share using the weighted-average number of common shares and dilutive common equivalent shares outstanding
for the years ended December 31, 2019 and 2018:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">For the</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">Year Ended</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2019</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">December 31, 2018</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td>
<td> </td>
<td colspan="2" style="text-align: right"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; padding-bottom: 2.5pt"><font style="font-size: 10pt">Numerator – net income</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double; width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; width: 18%; text-align: right"><font style="font-size: 10pt">168</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double; width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; width: 18%; text-align: right"><font style="font-size: 10pt">14,625</font></td>
<td style="width: 1%; padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Weighted average number of shares outstanding, basic</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">25,323,159</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">21,917,570</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Dilutive common equivalents</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,142,939</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,894,475</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Denominator – number of shares used for diluted earnings per share computation</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">26,466,098</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">23,812,045</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Net income per share, diluted</b></font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.01</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.61</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company is subject to taxation in the United
States, California, New Jersey, Texas and Pennsylvania. The provision for income taxes for the years ended December 31, 2019 and
2018 are summarized below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2019</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2018</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Current:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Federal</font></td>
<td> </td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td>
<td> </td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 46%; padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">State</font></td>
<td style="width: 1%"> </td>
<td style="border-bottom: black 1.5pt solid; width: 1%"> </td>
<td style="border-bottom: black 1.5pt solid; width: 24%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">8</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="border-bottom: black 1.5pt solid; width: 1%"> </td>
<td style="border-bottom: black 1.5pt solid; width: 24%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Total current</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">8</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Deferred:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Federal</font></td>
<td> </td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">669</font></td>
<td> </td>
<td> </td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,294</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">State</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(148</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">440</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Change in valuation allowance</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(521</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(3,734</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Total deferred</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Income tax provision (benefit)</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">8</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6</font></td>
<td> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A reconciliation of income taxes computed by
applying the statutory U.S. income tax rate to the Company’s loss before income taxes to the income tax provision is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2019</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2018</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 50%"><font style="font: 10pt Times New Roman, Times, Serif">U.S. federal statutory tax rate</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 22%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">21.00</font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 22%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">21.00</font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Benefit of lower tax brackets</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">State tax benefit, net</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(6.73</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.04</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Research and development credits</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.14</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Employee stock-based compensation</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3.10</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.46</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Loss on debt conversion</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Capitalization of Subsidiary</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Change in Rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.00</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Other</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(358.67</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.13</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Valuation allowance</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">334.57</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(21.93</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Effective income tax rate</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(6.73</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)%</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.44</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)%</font></td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred tax assets and liabilities reflect
the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2019</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2018</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Deferred tax assets (liabilities):</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 50%; padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">NOLs</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 22%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">19,827</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 22%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">19,726</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Depreciation and amortization</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">224</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">30</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Other</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">640</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">604</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Research and development credits</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">596</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">617</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Deferred stock compensation</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,533</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,036</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Basis Difference in Melt</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,185</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Basis Difference in Surface</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,119</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,464</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Basis Difference in Eton</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(7,528</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(6,340</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Capital Losses</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">62</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Park stock purchase identifiable intangibles</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(270</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(484</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Limitation Under 163(j)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">299</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">ASC 842 Lease Liability</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,082</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">ASC 842 ROU Asset</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,959</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 20pt"><font style="font: 10pt Times New Roman, Times, Serif">Total deferred tax assets, net</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">15,202</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">15,723</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Valuation allowance</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(15,202</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(15,723</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Net deferred tax liabilities</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A reconciliation of the change in the UTB balance
from January 1, 2019 to December 31, 2019 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Fed & State Tax</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 82%"><font style="font-size: 10pt">Balance at January 1, 2019</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Additions for tax positions related to current year</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Additions/(reductions) for tax positions related to prior years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Balance at December 31, 2019</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt"><b>Total unrecognized tax benefits as of December 31, 2019</b></font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
</table>
<p style="margin: 0pt"></p>
30149000
3507000
373000
1200000
0
1842000
24800000
50000
50000
0.06
50000
76000
270000
26466098
1844272
21917570
23812045
488498
25323159
654441
50203
1142939
1894475
26466098
23812045
187000
49000
640000
750000
All amounts owed under the SWK Loan Agreement, including a final fee equal to 5% of the aggregate principal amount loaned thereunder, were previously due and payable on July 19, 2022.
1282000
415586
615386
982000
3703000
9000
25273
30000
30000
136360
15000
185000
38860
15000
300000
1750000
2450000
35427
300000
42000
1139000
300000
75000
305619
642000
20000
4233000
813000
5000000
5000000
0.001
0.001
246000
1298946
1275680
1411930
136360
223860
159626
87610
2.42
2.16
2.76
3.94
3.42
780386
1.79
125000
40000
615386
780386
500000
3700000
65874000
2026
354000
67538000
2017
305000
8000
6000
8000
6000
669000
3294000
-148000
440000
-521000
-3734000
0
0
0.2100
0.2100
0.0000
0.0000
-0.0673
0.0004
0.0000
0.0014
0.0310
0.0046
0.0000
0.0000
0.0000
0.0000
-3.5867
0.0013
3.3457
-0.2193
-0.0673
-0.0044
19827000
19726000
224000
30000
596000
617000
3533000
3036000
-1185000
-1119000
-1464000
270000
484000
15202000
15723000
15202000
15723000
640000
604000
-7528000
-6340000
62000
299000
2082000
-1959000
1.00
1.00
0.04
0.04
312000
248000
42000
159000
371000
245000
63000
122000
0
0
15000
28000
40000
0
518000
39000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Future minimum lease payments under operating
leases and future minimum capital lease payments as of December 31, 2018 were as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Capital Leases</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Operating Leases</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 62%"><font style="font-size: 10pt">2019</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">751</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 16%; text-align: right"><font style="font-size: 10pt">797</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2020</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">857</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">742</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2022</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">320</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2023</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">330</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Thereafter</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">196</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">751</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,242</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Less: Amounts representing interest</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(15</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: Amounts representing unamortized discount</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(16</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Total obligation under capital leases</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">720</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Less: Current portion of capital leases</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(720</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Long term capital lease obligation</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
2
250000
5320000
5810000
5725000
P3Y
P5Y
6967000
The interest rate calculation that the loan bears is now equal to the three-month London Inter-Bank Offered Rate (subject to a minimum of 2.00%), plus an applicable margin of 10.00% (the "Margin Rate"); provided that, if, two days prior to a payment date, the Company provides the SWK evidence that the Company has achieved a leverage ratio as of such date of less than 4.00:1:00, the Margin Rate shall equal 9.00%; and if the Company has achieved a leverage ratio as of such date of less than 3.00:1:00, the Margin Rate shall equal 7.00%
Prior to the loan refinance in May 2019 (see below), the SWK Loan was bearing interest at a variable rate equal to the three-month London Inter-Bank Offered Rate (subject to a minimum of 1.50% and maximum of 3.00%), plus an applicable margin of 10.50%.
P7Y
P7Y
2.08
0
1.77
113.5
751000
15000
0.0000
0.0000