3.78
20000000
5000000
3000000
60687478
5000000
600000
200000
2000000
12900000
0.11
15000000
1400000
1404000
773000
0.01
12735000
0.13
12900000
627000
60687478
60977210
8050000
57000
8025000
400000000
406198000
7514000
232000
610000
55616000
431000
629000
285000
49999000
2545000
39730000
129000
0.01
4000000
40000
57309000
85000
0
85000
0
174259000
8050000
23138000
24000
64309000
64309000
7000000
74000
1000
628000
-166209000
300000
9253876
-569065000
3064416
289732
194000
3952000
0
24000
38016000
0
7000
11983000
15000000
10000000
208000
154000
173000
10269000
39730000
49700000
2300000
800000
437000
1463000
10000000
0.70
865000
0.50
10000000
34388000
2113000
0.70
1.25
3628000
143000
0.70
0.50
1277000
0.70
0.50
10000000
0.70
0.50
1812000
2600000
1275000
4859000
386000
474000
0.70
0.50
0.13
49700000
1.25
39067000
49650000
0.025
0.20
0.05
601000
27000
6200000
0.13
2300000
106000
2258000
0.10
800000
0.50
800000
794000
794000
24300000
24342000
24300000
20000000
24342000
3683000
24414000
5000000
205000
2121000
0.01
11041000
616000
60687478
60977210
15810000
55000
15774000
400000000
405944000
12898000
455000
610000
55616000
1762000
631000
184000
304000
47966000
35623000
0.01
4000000
93000
54172000
782000
0
1340000
0
167728000
15810000
22855000
61172000
61172000
558000
7000000
12000
628000
-151918000
-554520000
289732
1081000
3952000
0
24000
35071000
14000
12690000
208000
804000
12343000
35623000
552000
1729000
0.68
0.50
30823000
3648000
0.68
1.25
3130000
377000
0.68
0.50
1118000
105000
0.68
0.50
0.68
0.50
2142000
1507000
5744000
205000
456000
560000
0.68
0.50
37450000
46542000
601000
27000
166000
2115000
755000
755000
22801000
22801000
5
6200000
800000
14000000
0.50
5000000
9000000
4515544
1588682
74132112
-2279000
-0.50
4181000
15975000
10000
138000
3928000
-188000
225000
6391000
-16354000
8000
87000
13987000
-30254000
2000
305000
535000
-14000
-13900000
121000
12000000
-174000
382000
-14279000
-9971000
382000
12000000
9414000
219000
60687478
1945000
-9783000
6270000
6390750
40297635
25008082
200000
4000000
600000
200000
2300000
29000
200000
2500000
EMISPHERE TECHNOLOGIES INC
1851000
77051651
On August 20, 2014, the Lenders and the Company further amended and restated (i) the Convertible Notes issued by the Company to certain of the Lenders, (ii) the Bridge Notes issued by the Company to certain of the Lenders, and (iii) the Reimbursement Notes (and, together with the Convertible Notes and Bridge Notes, the "MHR Notes")
10-Q
0000805326
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
<b>9. Notes Payable</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
Notes payable, related party, net of related discounts, consists of
the following:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="68%"></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">
<b>September 30, 2016</b><br />
<b>(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center"><b>(in
thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Convertible Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">39,067</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">37,450</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Loan Agreement</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">24,342</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">22,801</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Bridge Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">106</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">166</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Reimbursement Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">794</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">755</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"" bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">64,309</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">61,172</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Less: Current portion</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7,000</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7,000</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Non-current notes payable, net of related discounts</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">57,309</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">54,172</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
<b>Loan Agreement.</b> On August 20, 2014, the
Company entered into a series of agreements (the Transaction
Documents) with MHR Capital Partners Master Account LP, MHR Capital
Partners (100) LP, MHR Institutional Partners II LP, and MHR
Institutional Partners IIA LP, (collectively, “MHR” or
the “Lenders”), for a new loan facility (the
“Loan Agreement”), an extension of the Company’s
existing obligations under various promissory notes previously
issued to the Lenders, and for payment by the Company of certain
royalties to MHR (the “Transaction”).</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12px; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
The Loan Agreement provides for, among other things, a commitment
(the “Commitment”) of the Lenders to loan the Company
up to $20 million to finance the development, manufacturing,
marketing and sale of oral Eligen <sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> B12 (the “B12
Product”). The Company may made five borrowings (each, a
“Borrowing”, and collectively, the “Loan”)
under the Loan Agreement. The first borrowing under the Loan
Agreement occurred on August 20, 2014, in an original
principal amount of $5.0 million, the second occurred on
November 4, 2014 in an original principal amount of $3.0
million, the third occurred on January 6, 2015 in an original
principal amount of $5.0 million, the fourth occurred on
April 6, 2015 in an original principal amount of $5.0 million,
and the fifth and final borrowing occurred on July 1, 2015 in
an original principal amount of $2.0 million. In addition, as
described below, if the Company does not have sufficient cash in
excess of the Minimum Cash Balance, as defined below, to pay any
Royalties that become due under the Royalty Agreement, as described
below, such Royalties will be paid as an additional Loan under the
Loan Agreement by increasing the principal amount outstanding under
the Loan Agreement (any such Loan, “Paid-In-Kind
Royalties”). The “Minimum Cash Balance” generally
means cash on hand (plus certain cash expenditures during such
fiscal year that are unrelated to the B12 Product or related
products) of at least $10 million (or $15 million, under certain
circumstances), subject to certain permitted deductions. On
December 31, 2015, the Company had a $12.9 million cash
balance, greater than the $10 million Minimum Cash Balance as
defined under the Loan Agreement, therefore $0.2 million Royalties
payable for 2015 under the Royalty Agreement was due in cash. MHR
has agreed to extend the date by which we are required to make the
$0.2 million Royalty payment in cash under the terms of the Royalty
Agreement until November 15, 2016.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
Except with respect to Paid-In-Kind Royalties incurred under the
Loan Agreement after all amounts of principal and interest have
previously been paid in full, the Loan will mature on the earlier
of (a) December 31, 2019 and, (b) 30 days after the
end of any fiscal year in which the Company’s cash (plus
certain cash expenditures during such fiscal year that are
unrelated to the B12 Product or related products) as of the end of
such fiscal year (subject to certain permitted deductions) is more
than three times the principal amount of the Loan as of the end of
such fiscal year. Paid-In-Kind Royalties incurred under the Loan
Agreement after all amounts of principal and interest have
previously been paid in full mature one year following the date of
incurrence. The Loan bears interest at a rate of 13% per annum
(the “Interest Rate”), compounded monthly, and will be
payable in kind and in arrears on June 30 and December 31
of each year up to and including the maturity date by increasing
the outstanding principal amount of the Loan by the amount of each
such interest payment. So long as an event of default under the
Loan Agreement (an “Event of Default”) has occurred and
is continuing, at the election of MHR, interest shall accrue on the
Loan at a rate equal to 2% per annum above the Interest Rate
(“Default Rate”). Interest at the Default Rate shall
accrue from the initial date of such Event of Default until that
Event of Default is cured or waived in writing and shall be payable
upon demand and, if not paid when due, shall itself bear interest
at the Default Rate. The Loan must be repaid from time to time
prior to maturity pursuant to (a) a cash sweep of 50% of the
Company’s adjusted consolidated free cash flow, or 75% of the
Company’s adjusted consolidated free cash flow in any year in
which the adjusted consolidated free cash flow exceeds $50 million,
to the extent such cash sweep does not cause the Company’s
cash as of the end of such year to be less than the Minimum Cash
Balance, (b) a cash sweep of 50% of any cash proceeds received
from any third party in connection with the license, distribution
or sale of any of the Company’s products other than the B12
Product or related products (the “Non-B12 Products”),
subject to the priority described below, and (c) a Royalty
Match (as described below), to the extent such Royalty Match does
not cause the Company’s cash as of the end of such year to be
less than the Minimum Cash Balance and subject to the priority
described below. The Loan Agreement provides for certain
representations and warranties, conditions precedent to the
Lenders’ obligation to lend, affirmative and negative
covenants of the Company (including, but not limited to, certain
milestones in the development of its B12 Products) and Events of
Default.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
In connection with the cash proceeds of $14 million from Novo
Nordisk in October 2015, the Company was obligated to pre-pay $0.8
million of the Reimbursement Notes and $6.2 million of the Loans on
November 26, 2015. The creditor under our Loan Agreement and
Reimbursement Notes has agreed to extend the date by which we are
required to pre-pay such amounts under the Loan Agreement and
Reimbursement Notes until November 15, 2016. Because the Loan
Prepayment deadline has not been extended beyond one year from
September 30, 2016, we have classified $0.8 million of the
Reimbursement Notes and $6.2 million of the Loans as a current
liability as of September 30, 2016 in the accompanying
condensed balance sheet.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
In connection with the entry into the Loan Agreement, on
August 20, 2014, the Lenders and the Company further amended
and restated (i) the Convertible Notes issued by the Company
to certain of the Lenders, (ii) the Bridge Notes issued by the
Company to certain of the Lenders, and (iii) the Reimbursement
Notes (and, together with the Convertible Notes and Bridge Notes,
the “MHR Notes”). Also, in connection with the entry
into the Loan Agreement and the amendment and restatement of the
MHR Notes, Institutional Partners IIA and the Company have amended
the Pledge and Security Agreement, dated September 26, 2005,
as amended, by and between the Company and Institutional Partners
IIA to, among other things, secure the Reimbursement Notes and
payments due under the Loan Agreement with substantially all of the
Company’s assets, and secure the payments due under the
Royalty Agreement and Paid-In-Kind Royalties due under the Loan
Agreement with the Company’s intellectual property relating
to the B12 Products and related products. As of September 30,
2016, the principal balance of the Loan was $24.3 million.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
<b>Convertible Notes.</b> On September 26, 2005, we
received net proceeds of approximately $12.9 million under a $15
million secured loan agreement (the “2005 Loan
Agreement”) executed with MHR. Under the 2005 Loan Agreement,
MHR requested, and on May 16, 2006, we effected, the exchange
of the loan from MHR for the predecessor of the Convertible Notes,
which were 11% senior secured convertible notes with substantially
the same terms as the 2005 Loan Agreement, except that the original
Convertible Notes were convertible, at the sole discretion of MHR,
into shares of our common stock at a price per share of $3.78. In
connection with the original Convertible Notes exchange, the
Company agreed to appoint a representative of MHR (the “MHR
Nominee”) and another person (the “Mutual
Director”) to the Board. Further, the Company agreed to
amend, and in January 2006 did amend, its certificate of
incorporation to provide for continuity of the MHR Nominee and the
Mutual Nominee on the Board so long as MHR holds at least 2% of the
outstanding common stock of the Company. The original Convertible
Notes were amended and restated on May 7, 2013 and as
described above, amended and restated a second time on
August 20, 2014.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12px; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
The Convertible Notes now provide for a new maturity date of
March 31, 2022 (subject to acceleration upon the occurrence of
certain specified events of default, including the failure to meet
certain sales, performance, and manufacturing milestones specified
in the Convertible Notes). The interest rate is 13% per annum,
compounded monthly, which interest will be payable in the form of
additional Convertible Notes. The Convertible Notes are
collateralized by a first priority lien in favor of the Lenders on
substantially all of the Company’s assets. After all
principal and interest under the Loan Agreement and Reimbursement
Notes are repaid, the remaining Convertible Notes must be redeemed
from time to time prior to maturity pursuant to a cash sweep of 50%
of the Company’s adjusted consolidated free cash flow (75% of
the Company’s adjusted consolidated free cash flow in any
year in which the Company’s adjusted consolidated free cash
flow exceeds $50 million) to the extent such cash sweep does not
cause the Company’s cash as of the end of such year to be
less than the Minimum Cash Balance. The Convertible Notes are
convertible, at the option of the holders, at a conversion price of
$1.25 per share of common stock, which conversion price is subject
to adjustment upon the occurrence of specified events, including
stock dividends, stock splits, certain fundamental corporate
transactions, and certain issuances of common stock by the Company.
The Convertible Notes must also be redeemed from time to time prior
to maturity pursuant to (a) a cash sweep of 50% of any cash
proceeds received from any third party in connection with the
license, distribution or sale of any Non-B12 Product, subject to
the priority described below and (b) a Royalty Match (as
described below), to the extent such Royalty Match does not cause
the Company’s cash as of the end of such year to be less than
the Minimum Cash Balance and subject to the priority described
below. If we fail to meet our obligations under the terms of the
Convertible Notes, or fail to meet any of the net sales targets
included in the Convertible Notes, we would be in default under
these notes, which would give MHR the option of foreclosing on
substantially all of our assets. We do not anticipate meeting the
annual sales target at December 31, 2016, however, the Company
is currently in discussions with the creditor for a permanent
waiver of this condition. As of September 30, 2016, the
principal balance of the Convertible Notes was $49.7 million; and
the Convertible Notes were convertible into 39,720,243 shares of
our common stock.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
<b>Reimbursement Notes.</b> On June 8, 2010, the
Company issued the predecessor to the Reimbursement Notes to MHR in
the form of certain non-interest bearing promissory notes in the
aggregate principal amount of $600,000 in reimbursement for legal
expenses incurred by MHR in connection with MHR’s agreement
to, among other things, waive certain rights as a senior secured
party of the Company and enter into a non-disturbance agreement
with the Company’s collaboration partner, Novartis Pharma AG,
and, if necessary, to enter into a comparable agreement in
connection with another potential Company transaction. The original
Reimbursement Notes were amended and restated on May 7, 2013
and, as described above, amended and restated again on
August 20, 2014.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
The Reimbursement Notes provide for a maturity date of the earlier
of (a) March 31, 2022 and (b) immediately prior to
the time that any amounts outstanding under the Loan Agreement are
repaid (subject to acceleration upon the occurrence of certain
events of default specified in the Reimbursement Notes), and bear
interest at the rate of 10% per annum, compounded monthly,
which interest is payable in the form of additional Reimbursement
Notes. The Reimbursement Notes are collateralized by a first
priority lien in favor of the Lenders on substantially all of the
Company’s assets. The Reimbursement Notes are convertible, at
the option of the holders, at a conversion price of $0.50 per share
of common stock, which conversion price is subject to adjustment
upon the occurrence of specified events, including stock dividends,
stock splits, certain fundamental corporate transactions, and
certain issuances of common stock by the Company. The Reimbursement
Notes must also be redeemed from time to time prior to maturity
pursuant to a cash sweep of 50% of any cash proceeds received from
any third party in connection with the license, distribution or
sale of any Non-B12 Product, subject to the priority described
below. As of September 30, 2016, the principal balance of the
Reimbursement Notes was $0.8 million; and the Reimbursement Notes
were convertible into 1,588,682 shares of our common stock.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
In connection with the cash proceeds of $14 million from Novo
Nordisk in October 2015, the Company was obligated to pre-pay $0.8
million of the Reimbursement Notes and $6.2 million of the Loans on
November 26, 2015. The creditor under the Reimbursement Notes
and Loan Agreement has agreed to extend the date by which we are
required to pre-pay such amounts under the Reimbursement Notes and
Loan Agreement until November 15, 2016.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
<b>Bridge Notes.</b> On October 17, 2012, the
Company issued to MHR the predecessor to the Bridge Notes in the
aggregate principal amount of $1,400,000. The original Bridge Notes
provided for an interest rate of 13% per annum and were
payable on demand. The Bridge Notes were amended and restated on
May 7, 2013 and restated again on August 20, 2014.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
The Bridge Notes provide for a maturity date of March 31, 2022
(subject to acceleration upon the occurrence of certain events of
default specified) and bear interest at 13% per year,
compounded monthly and payable in the form of additional Bridge
Notes. The Bridge Notes are collateralized by a first priority lien
in favor of the Lenders on substantially all of the Company’s
assets. The Bridge Notes are convertible, at the option of the
holders, at a conversion price of $0.50 per share of common stock,
which conversion price is subject to adjustment upon the occurrence
of specified events, including stock dividends, stock splits,
certain fundamental corporate transactions, and certain issuances
of common stock by the Company. The Bridge Notes must also be
redeemed from time to time prior to maturity pursuant to (a) a
cash sweep of 50% of any cash proceeds received from any third
party in connection with the license, distribution or sale of any
Non-B12 Product, subject to the priority described below and
(b) a Royalty Match (as described below), to the extent such
Royalty Match does not cause the Company’s cash as of the end
of such year to be less than the Minimum Cash Balance and subject
to the priority described below. As of September 30, 2016, the
principal balance the Bridge Notes was $2.3 million; and the Bridge
Notes were convertible into 4,515,544 shares of our common
stock.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
The priority of the cash sweep for Non-B12 Products is as follows:
(i) to redeem the Reimbursement Notes, (ii) to prepay
principal and interest outstanding under the Loan Agreement;
(iii) to reduce the Commitment; (iv) to redeem the
Convertible Notes; and (v) to redeem the Bridge Notes.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
<b>Royalty Agreement</b>. As a condition to MHR entering into the
Loan Agreement and amending and restating the MHR Notes, the
Company and MHR entered into a Royalty Agreement (the
“Royalty Agreement”) on August 20, 2014 pursuant
to which the Company agreed to pay to MHR, subject to specified
terms and conditions, royalties in perpetuity (the
“Royalties”), commencing as of the date of the Royalty
Agreement, in an amount equal to: twenty percent (20%) of all
Net Product Sales (as defined in the Royalty Agreement) and any
third party payments arising in connection with the sale of the B12
Product and related products, during any fiscal year; provided
that, from and after October 1, 2015, if no amount of
indebtedness is outstanding under the Loan Agreement (the
“Indebtedness Repayment Condition”), such amount shall
be reduced to (i) five percent (5%) of all Net Sales and
third party payments commencing with the first quarter immediately
following the quarter in which the Indebtedness Repayment Condition
is satisfied, or (ii) two and one half percent (2.5%) of
all Net Sales commencing with the quarter immediately following the
quarter in which the Indebtedness Repayment Condition is satisfied,
but only with respect to the Net Sales made in any country in which
there was not a Valid Patent Claim (as defined in the Royalty
Agreement) and where generic entry of a competitive product not by
the Company or its affiliates that does not infringe a Valid Patent
Claim in such country has occurred, in each case as of the last day
of such Fiscal Quarter. Once the royalty rate has been reduced to
5%, the rate shall not be reinstated to 20% even if amounts become
outstanding under the Loan Agreement as a result of Paid-In-Kind
Royalties. Payments of Royalties shall be made in cash to the
extent such Royalties do not cause the Company’s cash as of
the end of any year to be less than the Minimum Cash Balance, and
otherwise shall be paid as Paid-In-Kind Royalties.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
If any Royalties become due under the Royalty Agreement when the
royalty rate is 5% or 2.5%, the amount outstanding under the Loan
Agreement, Convertible Notes and Bridge Notes shall be reduced in
an amount equal to such royalty payment, to the extent such payment
does not cause the Company’s cash as of the end of such year
to be less than the Minimum Cash Balance (the “Royalty
Match”), in the following priority: (i) first, to prepay
the Loan; (ii) second, to redeem the Convertible Notes; and
(iii) finally, to redeem the Bridge Notes. For the three and
nine months ended September 30, 2016, the Company recorded $32
and $173 thousand of royalty expense, respectively.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
The carrying value of the MHR Notes is comprised of the
following:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="68%"></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">
<b>September 30, 2016</b><br />
<b>(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center"><b>(in
thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Convertible Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">49,650</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">46,542</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Loan Agreement</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">24,342</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">22,801</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Bridge Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,258</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,115</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Reimbursement Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">794</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">755</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Unamortized discounts</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(12,735</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(11,041</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">64,309</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">61,172</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<br class="Apple-interchange-newline" />
</div>
2016-09-30
-5384000
-0.24
254000
2016
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The following table summarizes the changes in fair value of the
Company’s Level 3 financial instruments for the periods ended
September 30, 2016 and December 31, 2015.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="72%"></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30,<br />
2016<br />
(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,<br />
2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Beginning Balance</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">35,623</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">24,414</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Derivative liability of embedded conversion feature of the Bridge
Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">143</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">377</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Derivative liability of embedded conversion feature of the
Reimbursement Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">105</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Derivative liability of the embedded conversion feature of the
Convertible Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,113</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,648</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Change in fair value</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,851</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7,079</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Ending Balance</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">39,730</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">35,623</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
false
--12-31
4043000
9161000
2006-05-16
11000
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>10. Derivative Instruments</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
Derivative instruments consist of the following:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="64%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30, 2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31, 2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2"> </td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center"><b>(in
thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Convertible Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">34,388</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">30,823</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Reimbursement Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,277</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,118</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Bridge Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,628</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,130</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Amended and Restated August 2009 Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,812</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,142</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Amended and Restated June 2010 MHR Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">437</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">552</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Amended and Restated August 2010 Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,275</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,507</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Amended and Restated August 2010 MHR Waiver Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">474</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">560</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Amended and Restated July 2011 Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,463</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,729</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
July 2011 Investor Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">205</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Amended and Restated July 2011 MHR Waiver Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">386</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">456</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
May 2013 MHR Modification Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4,859</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,744</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">49,999</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">47,966</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
Some of the Company’s outstanding derivative instruments have
an exercise price reset feature. The estimated fair value of
warrants and embedded conversion features that have an exercise
price reset feature is estimated using the Monte Carlo valuation
model. The estimated fair value of warrants that do not contain an
exercise price reset feature is measured using the Black-Scholes
valuation model. Inherent in both of these models are assumptions
related to expected volatility, remaining life, risk-free rate and
expected dividend yield. For the Monte Carlo model, we estimate the
probability and timing of potential future financing and
fundamental transactions as applicable.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b><i>Embedded Conversion Feature of MHR Notes.</i></b> The
Convertible Notes, the Reimbursement Notes, and the Bridge Notes
(collectively, the “MHR Notes”) contain a provision
whereby the conversion price is adjustable upon the occurrence of
certain events, including the issuance by Emisphere of common stock
or common stock equivalents at a price which is lower than the
current conversion price of each of the MHR Notes and lower than
the then-current market price. Under FASB ASC 815-40-15-5, the
embedded conversion feature of the MHR Notes is not considered
indexed to the Company’s own stock and, therefore, does not
meet the scope exception in FASB ASC 815-10-15 and thus needs to be
accounted for as a derivative liability. The liabilities associated
with the Convertible Notes and the Bridge Notes have been presented
as a non-current liability as of September 30, 2016 and
December 31, 2015, to correspond to their host contracts.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b>Convertible Notes</b><b><i>.</i></b> In addition to the
foregoing, the adjustment provision of the Convertible Notes does
not become effective unless and until the Company were to raise $10
million through the issuance of common stock or common stock
equivalents during any consecutive 24 month period. The fair value
of the embedded conversion feature of the Convertible Notes is
estimated at the end of each quarterly reporting period using the
Monte Carlo model. The assumptions used in computing the fair
values as September 30, 2016 and December 31, 2015, are
as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="72%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30,</b><br />
<b>2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Closing stock price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.70</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.68</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1.25</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1.25</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">146</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">143</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Remaining term (years)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5.5</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6.25</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Risk-free rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.20</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.95</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected dividend yield</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The fair value of the embedded conversion feature of the
Convertible Notes increased $0.6 million and $1.5 million for the
three and nine months ended September 30, 2016, respectively,
which has been recognized in the accompanying statements of
operations. The fair value of the embedded conversion feature of
the Convertible Notes decreased $0.3 million and increased $4.0
million for the three and nine months ended September 30,
2015, respectively, which has been recognized in the accompanying
statement of operations.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b>Reimbursement Notes</b><i>.</i> The fair value of the embedded
conversion feature of the Reimbursement Notes is estimated at the
end of each quarterly reporting period using the Monte Carlo model.
The assumptions used in computing the fair value as of
September 30, 2016 and December 31, 2015 are as
follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="72%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30,</b><br />
<b>2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Closing stock price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.70</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.68</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">146</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">143</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Remaining term (years)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6.25</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Risk-free rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.20</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.95</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected dividend yield</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The fair value of the embedded conversion of the Reimbursement
Notes increased $35 thousand and $0.2 million for the three and
nine months ended September 30, 2016, respectively, which has
been recognized in the accompanying statements of operations. The
fair value of the embedded conversion feature of the Reimbursement
Notes decreased $33 thousand and increased $0.2 million for the
three and nine months ended September 30, 2015, respectively,
which has been recognized in the accompanying statement of
operations.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b>Bridge Notes</b><i>.</i> The fair value of the embedded
conversion feature of the Bridge Notes is estimated at the end of
each quarterly reporting period using the Monte Carlo model. The
assumptions used in computing the fair value as of
September 30, 2016 and December 31, 2015 are as
follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="72%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30,<br />
2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Closing stock price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.70</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.68</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">146</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">143</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Remaining term (years)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6.25</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Risk-free rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.20</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.95</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected dividend yield</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The fair value of the embedded conversion feature of the Bridge
Notes increased $0.1 million and $0.4 million for the three and
nine months ended September 30, 2016 respectively, which has
been recognized in the accompanying statements of operations. The
fair value of the embedded conversion feature of the Bridge Notes
decreased $0.1 million and increased $0.6 million for the three and
nine months ended September 30, 2015, respectively, which has
been recognized in the accompanying statements of operations.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>Amended and Restated June 2010 Warrants.</b> In June 2010, the
Company granted MHR warrants to purchase 865,000 shares of its
common stock (the “June 2010 Warrants”). In connection
with the Restructuring, on May 7, 2013, the Company amended
and restated the Original Warrants such that the expiration date of
the Original Warrant was extended to July 8, 2019, and the
exercise price was reduced to $0.50 per share (as amended and
restated, the “Amended and Restated June 2010
Warrants”). The exercise price of the Amended and Restated
June 2010 Warrants is adjustable upon the occurrence of certain
events, including the issuance by Emisphere of common stock or
common stock equivalents at a price which is lower than the current
exercise price of these warrants and lower than the current market
price. However, the adjustment provision does not become effective
unless the Company were to raise $10 million through the issuance
of common stock or common stock equivalents at a price which is
lower than the current conversion price of these warrants and lower
than the current market price during any consecutive 24 month
period. The fair value of the Amended and Restated June 2010
Warrants is estimated at the end of each quarterly reporting period
using the Monte Carlo model. The assumptions used in computing the
fair value of the Amended and Restated June 2010 Warrants as of
September 30, 2016 and December 31, 2015, are as
follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="72%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30,</b><br />
<b>2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Closing stock price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.70</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.68</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">107</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">136</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Remaining term (years)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2.77</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3.52</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Risk-free rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0.85</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.42</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected dividend yield</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The fair value of the Amended and Restated June 2010 MHR Warrants
decreased $15 thousand and $0.1 million for the three and nine
months ended September 30, 2016, respectively, which has been
recognized in the accompanying statements of operations. The fair
value of the Amended and Restated June 2010 MHR Warrants decreased
$60 thousand and increased $0.2 million for the three and nine
months September 30, 2015, respectively, which has been
recognized in the accompanying statements of operations.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b>Amended and Restated Warrants.</b> Prior to the Restructuring,
the Company issued to MHR warrants to purchase varying amounts of
its common stocks at various times from 2009 through 2011, as
described more fully below (the August 2009 Warrants, August 2010
Warrants, August 2010 MHR Waiver Warrants, July 2011 Warrants, July
2011 MHR Waiver Warrants, and collectively, the “Original
Warrants”). In connection with the Restructuring, on
May 7, 2013, the Company amended and restated each of the
Original Warrants such that the expiration date of each Original
Warrant was extended to July 8, 2019, and the exercise price
was reduced to $0.50 per share (as amended and restated, the
“Amended and Restated August 2009 Warrants”,
“Amended and Restated August 2010 Warrants”,
“Amended and Restated August 2010 MHR Waiver Warrants”,
“Amended and Restated July 2011 Warrants”,
“Amended and Restated July 2011 MHR Waiver Warrants”,
and collectively, the “Amended and Restated Warrants”)
. Under the terms of each of the Amended and Restated Warrants, as
well as the August 2010 Investor Warrants, July 2011 Investor
Warrants and 2013 Restructuring Warrants (collectively, the
Investor Warrants, and together with the Original Warrants, the
“Warrants”), the Company has an obligation to make a
cash payment to the holders of each of the Warrants for any gain
that could have been realized if such holder exercised the warrants
and we subsequently failed to deliver a certificate representing
the shares to be issued upon such exercise by the third trading day
after the Warrants were exercised. Accordingly, the Warrants have
been accounted for as a liability. The fair value of each of the
Warrants is estimated, at the end of each quarterly reporting
period, using the Black-Scholes model. The assumptions used in
computing the fair value of the Original Warrants as of
September 30, 2016 and December 31, 2015, are as
follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="72%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30,</b><br />
<b>2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Closing stock price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.70</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.68</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">107</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">141</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Remaining term (years)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2.77</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3.52</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Risk-free rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0.88</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.31</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected dividend yield</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The fair value of the Original Warrants decreased $0.2 million and
$1.0 million for the three and nine months ended September 30,
2016, respectively, which has been recognized in the accompanying
statements of operations. The fair value of the Original Warrants
decreased $1.0 million and increased $2.5 million for the three and
nine months ended September 30, 2015, respectively, which has
been recognized in the accompanying statements of operations.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>2013 Restructuring Warrants</b><i>.</i> The Company issued to
MHR warrants to purchase 10 million shares of its common stock
(the “2013 Restructuring Warrants”) as part of the
Restructuring. The assumptions used in computing the fair value of
the 2013 Restructuring Warrants as of September 30, 2016 and
December 31, 2015, are as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="72%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30,</b><br />
<b>2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Closing stock price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.70</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.68</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">107</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">141</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Remaining term (years)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2.77</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3.52</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Risk-free rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0.88</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.31</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected dividend yield</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The fair value of the 2013 Restructuring Warrants decreased $0.1
million and $0.9 million for the three and nine months ended
September 30, 2016, respectively, which has been recognized in
the accompanying statements of operations. The fair value of the
2013 Restructuring Warrants decreased $0.9 million and increased
$2.3 million for the three and nine months ended September 30,
2015, respectively, which has been recognized in the accompanying
statements of operations.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b>August 2010 Investor Warrants</b><i>.</i> In connection with the
August 2010 Financing, Emisphere sold warrants to purchase
2.6 million shares of common stock to unrelated investors (the
“August 2010 Warrants”). On July 12, 2011, one of
the unrelated investors notified the Company of its intention to
exercise 0.2 million warrants. On August 26, 2015, the
remaining 2010 Investor Warrants expired.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The fair value of the August 2010 Investor Warrants decreased $15
thousand and $29 thousand for the three and nine months ended
September 30, 2015, respectively, which has been recognized in
the accompanying statements of operations.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b>July 2011 Investor Warrants</b><i>.</i> In connection with the
July 2011 Financing, Emisphere sold warrants to purchase
3.01 million shares of common stock to unrelated investors
(the “July 2011 Warrants”). On July 6, 2016, the
July 2011 Warrants expired.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The fair value of the July 2011 Investor Warrants decreased $0.2
million for the nine months ended September 30, 2016, which
has been recognized in the accompanying statements of operations.
The July 2011 Investor Warrants decreased $0.2 million and
increased $0.2 million for the three and nine months ended
September 30, 2015, respectively, which has been recognized in
the accompanying statements of operations.</p>
</div>
Interest at a rate of 13% per annum (the "Interest Rate"), compounded monthly, and will be payable in kind and in arrears on June 30 and December 31 of each year
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>4. Stock-Based Compensation Plans</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
On April 20, 2007, our stockholders approved the 2007 Stock
Award and Incentive Plan (the “2007 Plan”). The 2007
Plan provides for grants of options, stock appreciation rights,
restricted stock, deferred stock, bonus stock and awards in lieu of
obligations, dividend equivalents, other stock-based awards and
performance awards to our executive officers and other employees,
and non-employee directors, consultants and others who provide
substantial services to us. The 2007 Plan provides for the issuance
of an aggregate of 9,253,876 shares. As of September 30, 2016,
3,064,416 shares are available for future grants under our active
equity plans.</p>
<p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Total compensation expense recorded during the three and nine
months ended September 30, 2016 for share-based payment awards
was $80 thousand and $254 thousand, respectively. At
September 30, 2016, total unrecognized estimated compensation
expense related to non-vested stock options granted prior to that
date was $0.3 million which is expected to be recognized over a
weighted-average period of approximately 1.4 years. No options were
exercised in the three or nine months ended September 30,
2016. No tax benefit was realized due to a continued pattern of
operating losses.</p>
<p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
During the nine months ended September 30, 2016, the Company
granted 40,000 options to Michael Garone, former Chief Financial
Officer (valued on the grant date at $0.61 using the Black Scholes
pricing model).</p>
<p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
The following weighted-average assumptions were used for grants
made under the stock option plans for the nine months ended
September 30, 2016:</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="68%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="89%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr bgcolor="#CCEEFF" style="font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Expected volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">145.82</td>
<td nowrap="nowrap" valign="bottom">%</td>
</tr>
<tr style="font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Expected term (years)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6.79</td>
<td nowrap="nowrap" valign="bottom">  </td>
</tr>
<tr bgcolor="#CCEEFF" style="font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Risk free rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.82</td>
<td nowrap="nowrap" valign="bottom">%</td>
</tr>
<tr style="font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Dividend yield</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td nowrap="nowrap" valign="bottom">%</td>
</tr>
<tr bgcolor="#CCEEFF" style="font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Annual forfeiture rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">14.523</td>
<td nowrap="nowrap" valign="bottom">%</td>
</tr>
</table>
</div>
0
Q3
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
Prepaid expenses and other current assets consist of the
following:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="68%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">
<b>September 30, 2016</b><br />
<b>(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center"><b>(in
thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Prepaid corporate insurance</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">40</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">93</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Deposit on inventory</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">184</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Prepaid expenses and other current assets</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">154</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">804</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">194</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1,081</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
Smaller Reporting Company
139000
4830000
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>15. Fair Value</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
In accordance with FASB ASC 820, <i>“Fair Value Measurements
and Disclosures,”</i> the following table represents the
Company’s fair value hierarchy for its financial assets and
liabilities measured at fair value on a recurring basis as of
September 30, 2016 and December 31, 2015:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="84%" align="center" border="0">
<tr>
<td width="61%"></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom" nowrap="nowrap">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>September 30, 2016</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; WIDTH: 66.85pt; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt">
<b>(unaudited)</b></p>
</td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Level 2</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Level 3</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Total</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>(In thousands)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>(In thousands)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>(In thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Derivative Instruments</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">10,269</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">39,730</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">49,999</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1pt">
<td height="16"></td>
<td height="16" colspan="4"></td>
<td height="16" colspan="4"></td>
<td height="16" colspan="4"></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom" nowrap="nowrap">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; WIDTH: 64.65pt; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt">
<b>December 31, 2015</b></p>
</td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Level 2</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Level 3</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Total</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center"><b>(In
thousands)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>(In thousands)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>(In thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Derivative Instruments</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">12,343</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">35,623</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">47,966</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
Level 3 financial instruments consist of certain common stock
warrants and embedded conversion features. The fair value of these
warrants and embedded conversion features that have exercise reset
features are estimated using a Monte Carlo valuation model. The
unobservable input used by the Company was the estimation of the
likelihood of a reset occurring on the embedded conversion feature
of the Amended and Restated Convertible Notes, the embedded
conversion feature of the Amended and Restated Reimbursement Notes,
the embedded conversion feature of the Amended and Restated Bridge
Notes, and the embedded conversion feature of the Amended and
Restated June 2010 Warrants. These estimates of the likelihood of
completing an equity raise that would meet the criteria to trigger
the reset provisions are based on numerous factors, including the
remaining term of the financial instruments and the Company’s
overall financial condition.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The following table summarizes the changes in fair value of the
Company’s Level 3 financial instruments for the periods ended
September 30, 2016 and December 31, 2015.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="72%"></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30,<br />
2016<br />
(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,<br />
2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Beginning Balance</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">35,623</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">24,414</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Derivative liability of embedded conversion feature of the Bridge
Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">143</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">377</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Derivative liability of embedded conversion feature of the
Reimbursement Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">105</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Derivative liability of the embedded conversion feature of the
Convertible Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,113</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,648</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Change in fair value</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,851</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7,079</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Ending Balance</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">39,730</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">35,623</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
Changes in the unobservable input values would likely cause
material changes in the fair value of the Company’s Level 3
financial instruments. The significant unobservable input used in
the fair value measurement is the estimation of the likelihood of
the occurrence of a change to the contractual terms of the
financial instruments. A significant increase (decrease) in this
likelihood would result in a higher (lower) fair value
measurement.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>12. Commitments and Contingencies</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
<i>Commitments.</i></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
We lease office space at 4 Becker Farm Road, Roseland, New Jersey
under a non-cancellable operating lease expiring in 2017.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
As of September 30, 2016, future minimum rental payments are
as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0">
<tr>
<td width="84%"></td>
<td valign="bottom" width="13%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom" nowrap="nowrap">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; WIDTH: 95.55pt; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt">
<b>Years Ending December 31,</b></p>
</td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>(In thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2016 (remaining)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">24</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2017</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">74</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">129</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The Company evaluates the financial consequences of legal actions
periodically or as facts present themselves and records accruals to
account for its best estimate of future costs accordingly.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<i>Contingencies.</i></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
In the ordinary course of business, we enter into agreements with
third parties that include indemnification provisions which, in our
judgment, are normal and customary for companies in our industry
sector. These agreements are typically with business partners,
clinical sites, and suppliers. Pursuant to these agreements, we
generally agree to indemnify, hold harmless, and reimburse
indemnified parties for losses suffered or incurred by the
indemnified parties with respect to our product candidates, use of
such product candidates, or other actions taken or omitted by us.
The maximum potential amount of future payments we could be
required to make under these indemnification provisions is
unlimited. We have not incurred material costs to defend lawsuits
or settle claims related to these indemnification provisions. As a
result, the estimated fair value of liabilities relating to these
provisions is minimal. Accordingly, we have no liabilities recorded
for these provisions as of September 30, 2016.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
In the normal course of business, we may be confronted with issues
or events that may result in a contingent liability. These
generally relate to lawsuits, claims, environmental actions or the
action of various regulatory agencies. If necessary, management
consults with counsel and other appropriate experts to assess any
matters that arise. If, in our opinion, we have incurred a probable
loss as set forth by accounting principles generally accepted in
the U.S., an estimate is made of the loss and the appropriate
accounting entries are reflected in our financial statements.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
As a condition to MHR entering into the Loan Agreement and amending
and restating the MHR Notes, the Company and MHR entered into a
Royalty Agreement (the “Royalty Agreement”) on
August 20, 2014 providing for the payment by the Company to
MHR of certain royalties on the terms and conditions set forth
therein (see Note 9).</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
Under the terms of the Royalty Agreement, the Company agreed to pay
to MHR, subject to the terms and conditions of the Royalty
Agreement, royalties in perpetuity (the “Royalties”),
commencing as of the date of the Royalty Agreement, in an amount
equal to: twenty percent (20%) of all Net Product Sales (as
defined in the Royalty Agreement) and any third party payments
arising in connection with the sale of the B12 Product and related
products, during any fiscal year; provided that, from and after
October 1, 2015, if no amount of indebtedness is outstanding
under the Loan Agreement (the “Indebtedness Repayment
Condition”), such amount shall be reduced to (i) five
percent (5%) of all Net Sales and third party payments
commencing with the first quarter immediately following the quarter
in which the Indebtedness Repayment Condition is satisfied, or
(ii) two and one half percent (2.5%) of all Net Sales
commencing with the quarter immediately following the quarter in
which the Indebtedness Repayment Condition is satisfied, but only
with respect to the Net Sales made in any country in which there
was not a Valid Patent Claim (as defined in the Royalty Agreement)
and where generic entry of a competitive product not by the Company
or its affiliates that does not infringe a Valid Patent Claim in
such country has occurred, in each case as of the last day of such
Fiscal Quarter. Once the royalty rate has been reduced to 5%, the
rate shall not be reinstated to 20% even if amounts become
outstanding under the Loan Agreement as a result of Paid-In-Kind
Royalties. Payments of Royalties shall be made in cash to the
extent such Royalties do not cause the Company’s cash as of
the end of any year to be less than the Minimum Cash Balance, and
otherwise shall be paid as Paid-In-Kind Royalties.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>14. New Accounting Pronouncements</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
In July 2015, the FASB issued ASU
No. 2015-11, “Simplifying the Measurement of
Inventory” (“ASU 2015-11”). ASU 2015-11 requires
that inventory within the scope of the guidance be measured at the
lower of cost and net realizable value. Inventory measured using
last-in, first-out and retail inventory method are excluded from
this new guidance. This ASU replaces the concept of market with the
single measurement of net realizable value and is intended to
create efficiencies for preparers and more closely aligns U.S. GAAP
with IFRS. This ASU is effective for public business entities in
fiscal years beginning after December 15, 2016, including
interim periods within those years. Prospective application is
required and early adoption is permitted as of the beginning of an
interim or annual reporting period. The Company is currently
evaluating the impact of the new standards.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
In April 2015, the FASB issued ASU 2015-03, “Interest
– Imputation of Interest” (“ASU 2015-03”),
which requires that debt issuance costs related to a recognized
debt liability be presented in the balance sheet as a direct
deduction from the carrying amount of that debt liability,
consistent with debt discounts. The recognition and measurement
guidance for debt issuance costs are not affected by the amendments
in this ASU. ASU 2015-03 is effective for annual and interim
periods beginning on or after December 15, 2015. The adoption
of ASU 2015-03 did not have a material impact on our financial
position, results of operations or cash flows.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
In May 2014, the FASB issued ASU No. 2014-09, “Revenue
from Contracts with Customers” (“ASU 2014-09”),
which requires entities to recognize revenue in a way that depicts
the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects
to be entitled to in exchange for those goods or services. The new
guidance also requires additional disclosure about the nature,
amount, timing and uncertainty of revenue and cash flows arising
from customer contracts, including significant judgments and
changes in judgments and assets recognized from costs incurred to
obtain or fulfill a contract. In July 2015, the FASB voted to delay
the effective date of ASU 2014-09 by one year to the first quarter
of 2018 to provide companies sufficient time to implement the
standards. Early adoption will be permitted, but not before the
first quarter of 2017. Adoption can occur using one of two
prescribed transition methods. In March and April 2016, the FASB
issued ASU 2016-08, “Revenue from Contracts with Customers:
Principal versus Agent Considerations (Reporting Revenue Gross
versus Net)” and ASU 2016-10, “Revenue from Contracts
with Customers: Identifying Performance Obligations and
Licensing” which provide supplemental adoption guidance and
clarification to ASC 2014-09. ASU 2016-08 and ASU 2016-10 must be
adopted concurrently with the adoption of ASU 2014-09. The Company
is currently evaluating the impact of these new standards.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
In August 2014, the FASB issued ASU No. 2014-15,
“Disclosure of Uncertainties About an Entity’s Ability
to Continue as a Going Concern” (“ASU 2014-15”),
which provides guidance on management’s responsibility in
evaluating whether there is substantial doubt about an
entity’s ability to continue as a going concern and to
provide related footnote disclosures. ASU 2014-15 is effective for
the annual period ending after December 15, 2016, and for
annual and interim periods thereafter. The adoption of ASU 2014-15
is not expected to have a material impact on our financial
position, results of operations or cash flows.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
During January 2016, the FASB issued ASU No. 2016-01,
“Financial Instruments — Overall: Recognition and
Measurement of Financial Assets and Financial Liabilities
(“ASU 2016-01”). The standard addresses certain aspects
of recognition, measurement, presentation, and disclosure of
financial instruments. This ASU is effective for fiscal years, and
interim periods within those years, beginning after
December 15, 2017. Early adoption is not permitted with the
exception of certain provisions related to the presentation of
other comprehensive income. The adoption of ASU 2016-01 is not
expected to have a material impact on our financial position,
results of operations or cash flows.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
During February 2016, the FASB issued ASU No. 2016-02,
“Leases” (“ASU 2016-02”). The standard
requires lessees to recognize a lease liability and a lease asset
for all leases, including operating leases, with a term greater
than 12 months on its balance sheet. The update also expands the
required quantitative and qualitative disclosures surrounding
leases. ASU 2016-02 is effective for fiscal years beginning after
December 15, 2018, including interim periods within those
fiscal years. The Company is currently evaluating the impact of the
new standard.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
In March 2016, the FASB issued ASU No. 2016-06,
“Contingent Put and Call Option in Debt Instruments”
(“ASU 2016-06”). ASU 2016-06 is intended to simplify
the analysis of embedded derivatives for debt instruments that
contain contingent put or call options. The amendments in ASU
2016-06 clarify that an entity is required to assess the embedded
call or put options solely in accordance with the four-step
decision sequence. Consequently, when a call (put) option is
contingently exercisable, an entity does not have to initially
assess whether the event that triggers the ability to exercise a
call (put) option is related to interest rates or credit risks. The
amendments in ASU 2016-06 take effect for public business entities
for financial statements issued for fiscal years beginning after
December 15, 2016, and interim periods within those fiscal
years. Early adoption is permitted, including adoption in an
interim period. The Company does not expect the adoption of ASU
2016–01 to have a significant impact on its financial
statements.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
In March 2016, FASB issued ASU No. 2016-09,
“Improvements to Employee Share-based Payment
Accounting” (“ASU 2016-09”). ASU 2016-09
simplifies several aspects of the accounting for employee
share-based payment transactions for both public and nonpublic
entities, including the accounting for income taxes, forfeitures,
and statutory tax withholding requirements, as well as
classification in the statement of cash flows. ASU 2016-09 is
effective for annual periods beginning after December 15,
2016, and interim periods within those annual periods. The Company
is currently evaluating the standard and the impact on its
financial statements and footnote disclosures.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
In August 2016, FASB issued ASU No. 2016-15,
“Classification of Certain Cash Receipts and Cash
Payments” (“ASU 2016-15”). ASU 2016-15 clarifies
the presentation and classification of certain cash receipts and
cash payments in the statement of cash flows. ASU 2016-15 is
effective for fiscal years, and interim periods within those years
beginning after December 15, 2017. Early adoption is
permitted. The Company does not expect the adoption of ASU
No. 2016-15 to have a material impact on its financial
statements.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
Management does not believe there would have been a material effect
on the accompanying financial statements had any other recently
issued, but not yet effective, accounting standards been adopted in
the current period.</p>
</div>
205000
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>11. Net Loss Per Share</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
For the three and nine month periods ended September 30, 2016
and 2015, certain potential shares of common stock have been
excluded from the calculation of loss per share because the
exercise price was greater than the average market price of our
common stock, and therefore, the effect would have been
anti-dilutive. In addition, incremental shares from the assumed
conversion of the MHR note payable are excluded, as the effect of
these shares is anti-dilutive. The following table sets forth the
number of potential shares of common stock that have been excluded
from diluted net income per share because their effect was
anti-dilutive.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" align="center" border="0">
<tr>
<td width="64%"></td>
<td valign="bottom" width="1%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="1%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="1%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="1%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>Three Months Ended</b><br />
<b>September 30,</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>Nine Months Ended</b><br />
<b>September 30,</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2015</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Options to purchase common shares</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,219,100</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,390,750</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,219,100</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,390,750</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">21,997,775</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">25,008,082</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">21,997,775</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">25,008,082</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
MHR convertible notes payable</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">45,824,469</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">40,297,635</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">45,824,469</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">40,297,635</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">77,051,651</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">8,896,702</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">77,051,651</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">74,132,112</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
</table>
</div>
P1Y4M24D
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>8. Accounts Payable and Accrued Expenses</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
Accounts payable and accrued expenses consist of the following:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="68%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30, 2016<br />
(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,<br />
2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center"><b>(In
thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accounts payable</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">431</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1,762</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued legal, professional and other fees</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">285</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">304</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued vacation</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">57</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">55</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">773</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">2,121</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
863000
8110000
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>5. Inventory</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
Inventory consists of the following:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="72%"></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30,</b><br />
<b>2016</b><br />
<b>(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center">
<b>(In thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Raw Materials</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">558</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Finished Goods</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">85</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">782</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">85</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1,340</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
-7873000
12000
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
In accordance with FASB ASC 820, <i>“Fair Value Measurements
and Disclosures,”</i> the following table represents the
Company’s fair value hierarchy for its financial assets and
liabilities measured at fair value on a recurring basis as of
September 30, 2016 and December 31, 2015:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="84%" align="center" border="0">
<tr>
<td width="61%"></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom" nowrap="nowrap">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>September 30, 2016</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; WIDTH: 66.85pt; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt">
<b>(unaudited)</b></p>
</td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Level 2</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Level 3</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Total</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>(In thousands)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>(In thousands)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>(In thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Derivative Instruments</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">10,269</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">39,730</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">49,999</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1pt">
<td height="16"></td>
<td height="16" colspan="4"></td>
<td height="16" colspan="4"></td>
<td height="16" colspan="4"></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom" nowrap="nowrap">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; WIDTH: 64.65pt; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt">
<b>December 31, 2015</b></p>
</td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Level 2</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Level 3</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Total</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center"><b>(In
thousands)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>(In thousands)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>(In thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Derivative Instruments</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">12,343</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">35,623</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">47,966</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>7. Equipment and Leasehold Improvements, Net</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="84%" align="center" border="0">
<tr>
<td width="55%"></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Useful Lives</b><br />
<b>in Years</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">
<b>September 30, 2016</b><br />
<b>(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2"> </td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>(in thousands)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2"> </td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Equipment</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"><b> </b></td>
<td valign="bottom" align="center"><b>3-7</b></td>
<td valign="bottom" nowrap="nowrap"><b>  </b></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">601</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">601</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Leasehold improvements</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"><b> </b></td>
<td valign="bottom" align="center">
<b>Term of lease</b></td>
<td valign="bottom" nowrap="nowrap"><b>  </b></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">27</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">27</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">628</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">628</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Less: accumulated depreciation and amortization</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">627</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">616</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Equipment and leasehold improvements, net</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">12</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
-490000
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>13. Income Taxes</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
The Company is primarily subject to United States federal and New
Jersey state income tax. The Company’s policy is to recognize
interest and penalties related to income tax matters in income tax
expense. As of December 31, 2015 and September 30, 2016,
the Company had no accruals for interest or penalties related to
income tax matters.</p>
</div>
6182000
-14545000
-7000
1214000
<div>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="84%" align="center" border="0">
<tr>
<td width="55%"></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Useful Lives</b><br />
<b>in Years</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">
<b>September 30, 2016</b><br />
<b>(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2"> </td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>(in thousands)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2"> </td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Equipment</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"><b> </b></td>
<td valign="bottom" align="center"><b>3-7</b></td>
<td valign="bottom" nowrap="nowrap"><b>  </b></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">601</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">601</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Leasehold improvements</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"><b> </b></td>
<td valign="bottom" align="center">
<b>Term of lease</b></td>
<td valign="bottom" nowrap="nowrap"><b>  </b></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">27</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">27</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">628</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">628</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Less: accumulated depreciation and amortization</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">627</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">616</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Equipment and leasehold improvements, net</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">12</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
-223000
-887000
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
In July 2015, the FASB issued ASU
No. 2015-11, “Simplifying the Measurement of
Inventory” (“ASU 2015-11”). ASU 2015-11 requires
that inventory within the scope of the guidance be measured at the
lower of cost and net realizable value. Inventory measured using
last-in, first-out and retail inventory method are excluded from
this new guidance. This ASU replaces the concept of market with the
single measurement of net realizable value and is intended to
create efficiencies for preparers and more closely aligns U.S. GAAP
with IFRS. This ASU is effective for public business entities in
fiscal years beginning after December 15, 2016, including
interim periods within those years. Prospective application is
required and early adoption is permitted as of the beginning of an
interim or annual reporting period. The Company is currently
evaluating the impact of the new standards.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
In April 2015, the FASB issued ASU 2015-03, “Interest
– Imputation of Interest” (“ASU 2015-03”),
which requires that debt issuance costs related to a recognized
debt liability be presented in the balance sheet as a direct
deduction from the carrying amount of that debt liability,
consistent with debt discounts. The recognition and measurement
guidance for debt issuance costs are not affected by the amendments
in this ASU. ASU 2015-03 is effective for annual and interim
periods beginning on or after December 15, 2015. The adoption
of ASU 2015-03 did not have a material impact on our financial
position, results of operations or cash flows.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
In May 2014, the FASB issued ASU No. 2014-09, “Revenue
from Contracts with Customers” (“ASU 2014-09”),
which requires entities to recognize revenue in a way that depicts
the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects
to be entitled to in exchange for those goods or services. The new
guidance also requires additional disclosure about the nature,
amount, timing and uncertainty of revenue and cash flows arising
from customer contracts, including significant judgments and
changes in judgments and assets recognized from costs incurred to
obtain or fulfill a contract. In July 2015, the FASB voted to delay
the effective date of ASU 2014-09 by one year to the first quarter
of 2018 to provide companies sufficient time to implement the
standards. Early adoption will be permitted, but not before the
first quarter of 2017. Adoption can occur using one of two
prescribed transition methods. In March and April 2016, the FASB
issued ASU 2016-08, “Revenue from Contracts with Customers:
Principal versus Agent Considerations (Reporting Revenue Gross
versus Net)” and ASU 2016-10, “Revenue from Contracts
with Customers: Identifying Performance Obligations and
Licensing” which provide supplemental adoption guidance and
clarification to ASC 2014-09. ASU 2016-08 and ASU 2016-10 must be
adopted concurrently with the adoption of ASU 2014-09. The Company
is currently evaluating the impact of these new standards.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
In August 2014, the FASB issued ASU No. 2014-15,
“Disclosure of Uncertainties About an Entity’s Ability
to Continue as a Going Concern” (“ASU 2014-15”),
which provides guidance on management’s responsibility in
evaluating whether there is substantial doubt about an
entity’s ability to continue as a going concern and to
provide related footnote disclosures. ASU 2014-15 is effective for
the annual period ending after December 15, 2016, and for
annual and interim periods thereafter. The adoption of ASU 2014-15
is not expected to have a material impact on our financial
position, results of operations or cash flows.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
During January 2016, the FASB issued ASU No. 2016-01,
“Financial Instruments — Overall: Recognition and
Measurement of Financial Assets and Financial Liabilities
(“ASU 2016-01”). The standard addresses certain aspects
of recognition, measurement, presentation, and disclosure of
financial instruments. This ASU is effective for fiscal years, and
interim periods within those years, beginning after
December 15, 2017. Early adoption is not permitted with the
exception of certain provisions related to the presentation of
other comprehensive income. The adoption of ASU 2016-01 is not
expected to have a material impact on our financial position,
results of operations or cash flows.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
During February 2016, the FASB issued ASU No. 2016-02,
“Leases” (“ASU 2016-02”). The standard
requires lessees to recognize a lease liability and a lease asset
for all leases, including operating leases, with a term greater
than 12 months on its balance sheet. The update also expands the
required quantitative and qualitative disclosures surrounding
leases. ASU 2016-02 is effective for fiscal years beginning after
December 15, 2018, including interim periods within those
fiscal years. The Company is currently evaluating the impact of the
new standard.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
In March 2016, the FASB issued ASU No. 2016-06,
“Contingent Put and Call Option in Debt Instruments”
(“ASU 2016-06”). ASU 2016-06 is intended to simplify
the analysis of embedded derivatives for debt instruments that
contain contingent put or call options. The amendments in ASU
2016-06 clarify that an entity is required to assess the embedded
call or put options solely in accordance with the four-step
decision sequence. Consequently, when a call (put) option is
contingently exercisable, an entity does not have to initially
assess whether the event that triggers the ability to exercise a
call (put) option is related to interest rates or credit risks. The
amendments in ASU 2016-06 take effect for public business entities
for financial statements issued for fiscal years beginning after
December 15, 2016, and interim periods within those fiscal
years. Early adoption is permitted, including adoption in an
interim period. The Company does not expect the adoption of ASU
2016–01 to have a significant impact on its financial
statements.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
In March 2016, FASB issued ASU No. 2016-09,
“Improvements to Employee Share-based Payment
Accounting” (“ASU 2016-09”). ASU 2016-09
simplifies several aspects of the accounting for employee
share-based payment transactions for both public and nonpublic
entities, including the accounting for income taxes, forfeitures,
and statutory tax withholding requirements, as well as
classification in the statement of cash flows. ASU 2016-09 is
effective for annual periods beginning after December 15,
2016, and interim periods within those annual periods. The Company
is currently evaluating the standard and the impact on its
financial statements and footnote disclosures.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
In August 2016, FASB issued ASU No. 2016-15,
“Classification of Certain Cash Receipts and Cash
Payments” (“ASU 2016-15”). ASU 2016-15 clarifies
the presentation and classification of certain cash receipts and
cash payments in the statement of cash flows. ASU 2016-15 is
effective for fiscal years, and interim periods within those years
beginning after December 15, 2017. Early adoption is
permitted. The Company does not expect the adoption of ASU
No. 2016-15 to have a material impact on its financial
statements.</p>
</div>
-41000
-6672000
Loan will mature on the earlier of (a) December 31, 2019 and, (b) 30 days after the end of any fiscal year in which the Company's cash (plus certain cash expenditures during such fiscal year that are unrelated to the B12 Product or related products) as of the end of such fiscal year (subject to certain permitted deductions) is more than three times the principal amount of the Loan as of the end of such fiscal year.
173000
-1348000
-2000
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>2. Basis of Presentation</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
The condensed balance sheet at December 31, 2015 was derived
from audited financial statements but does not include all
disclosures required by accounting principles generally accepted in
the United States of America. The other information in these
condensed financial statements is unaudited but, in the opinion of
management, reflects all adjustments necessary for a fair
presentation of the results for the periods covered. All such
adjustments are of a normal recurring nature unless disclosed
otherwise. These condensed financial statements, including notes,
have been prepared in accordance with the applicable rules of the
Securities and Exchange Commission (the “SEC”) and do
not include all of the information and disclosures required by
accounting principles generally accepted in the United States of
America for complete financial statements. These condensed
financial statements should be read in conjunction with the
financial statements and additional information as contained in our
Annual Report on Form 10-K for the year ended December 31,
2015. Results of operations for the nine-month period ended
September 30, 2016 are not necessarily indicative of the
operating results that may be expected for the year ending
December 31, 2016.</p>
<p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Certain prior period amounts have been reclassified to conform to
current period presentation.</p>
</div>
-5384000
0
173000
225000
<div>
<p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
The following weighted-average assumptions were used for grants
made under the stock option plans for the nine months ended
September 30, 2016:</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="68%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="89%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr bgcolor="#CCEEFF" style="font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Expected volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">145.82</td>
<td nowrap="nowrap" valign="bottom">%</td>
</tr>
<tr style="font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Expected term (years)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6.79</td>
<td nowrap="nowrap" valign="bottom">  </td>
</tr>
<tr bgcolor="#CCEEFF" style="font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Risk free rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.82</td>
<td nowrap="nowrap" valign="bottom">%</td>
</tr>
<tr style="font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Dividend yield</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td nowrap="nowrap" valign="bottom">%</td>
</tr>
<tr bgcolor="#CCEEFF" style="font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Annual forfeiture rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">14.523</td>
<td nowrap="nowrap" valign="bottom">%</td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
The following table sets forth the number of potential shares of
common stock that have been excluded from diluted net income per
share because their effect was anti-dilutive.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" align="center" border="0">
<tr>
<td width="64%"></td>
<td valign="bottom" width="1%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="1%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="1%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="1%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>Three Months Ended</b><br />
<b>September 30,</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>Nine Months Ended</b><br />
<b>September 30,</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2015</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Options to purchase common shares</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,219,100</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,390,750</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,219,100</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,390,750</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">21,997,775</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">25,008,082</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">21,997,775</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">25,008,082</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
MHR convertible notes payable</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">45,824,469</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">40,297,635</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">45,824,469</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">40,297,635</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">77,051,651</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">8,896,702</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">77,051,651</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">74,132,112</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
Inventory consists of the following:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="72%"></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30,</b><br />
<b>2016</b><br />
<b>(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center">
<b>(In thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Raw Materials</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">558</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Finished Goods</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">85</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">782</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">85</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1,340</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
0.00
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
Derivative instruments consist of the following:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="64%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30, 2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31, 2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2"> </td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center"><b>(in
thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Convertible Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">34,388</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">30,823</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Reimbursement Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,277</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,118</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Bridge Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,628</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,130</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Amended and Restated August 2009 Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,812</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,142</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Amended and Restated June 2010 MHR Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">437</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">552</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Amended and Restated August 2010 Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,275</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,507</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Amended and Restated August 2010 MHR Waiver Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">474</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">560</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Amended and Restated July 2011 Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,463</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,729</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
July 2011 Investor Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">205</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Amended and Restated July 2011 MHR Waiver Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">386</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">456</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
May 2013 MHR Modification Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4,859</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,744</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">49,999</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">47,966</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
As of September 30, 2016, future minimum rental payments are
as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0">
<tr>
<td width="84%"></td>
<td valign="bottom" width="13%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom" nowrap="nowrap">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; WIDTH: 95.55pt; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt">
<b>Years Ending December 31,</b></p>
</td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>(In thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2016 (remaining)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">24</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2017</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">74</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">129</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
EMIS
2014-08-20
260000
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
The carrying value of the MHR Notes is comprised of the
following:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="68%"></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">
<b>September 30, 2016</b><br />
<b>(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center"><b>(in
thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Convertible Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">49,650</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">46,542</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Loan Agreement</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">24,342</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">22,801</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Bridge Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,258</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,115</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Reimbursement Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">794</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">755</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Unamortized discounts</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(12,735</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(11,041</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">64,309</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">61,172</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
1.4582
<div>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<i>Oral Eligen B12™ Rx Product</i></p>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
We sell our oral Eligen B12™ Rx product through drug
wholesalers and retail pharmacies. We recognize revenue from
prescription product sales, net of sales discounts, chargebacks,
and rebates. We accept returns of unsalable product from customers
within a return period of six months prior to and 12 months
following product expiration. Our oral Eligen B12™ Rx product
currently has a shelf life of 24 months from the date of
manufacture. Given the limited history of our oral Eligen
B12™ Rx product, we currently cannot reliably estimate
expected returns of the prescription products at the time of
shipment. Accordingly, we will defer recognition of revenue on
prescription products until the right of return no longer exists,
which occurs at the earlier of the time the oral Eligen B12™
Rx product is dispensed through patient prescriptions or expiration
of the right of return.</p>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<i>Collaborative Agreements and Feasibility Studies</i></p>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Revenue earned from collaborative agreements and feasibility
studies is comprised of reimbursed research and development costs,
as well as upfront and research and development milestone payments.
Deferred revenue represents payments received which are related to
future performance. Revenue from feasibility studies, which are
typically short term in nature, is recognized upon delivery of the
study, provided that all other revenue recognition criteria are
met.</p>
<p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Revenue from collaboration agreements are recognized using the
proportional performance method provided that we can reasonably
estimate the level of effort required to complete our performance
obligations under an arrangement and such performance obligations
are provided on a best effort basis and based on “expected
payments.” Under the proportional performance method,
periodic revenue related to nonrefundable cash payments is
recognized as the percentage of actual effort expended to date as
of that period to the total effort expected for all of our
performance obligations under the arrangement. Actual effort is
generally determined based upon actual hours incurred and include
research and development (“R&D”) activities
performed by us and time spent for Joint Steering Committee
(“JSC”) activities. Total expected effort is generally
based upon the total R&D and JSC hours incorporated into the
project plan that is agreed to by both parties to the
collaboration. Significant management judgments and estimates are
required in determining the level of effort required under an
arrangement and the period over which we expect to complete the
related performance obligations. Estimates of the total expected
effort included in each project plan are based on historical
experience of similar efforts and expectations based on the
knowledge of scientists for both the Company and its collaboration
partners. The Company periodically reviews and updates the project
plan for each collaborative agreement. The most recent reviews took
place in January 2016. In the event that a change in estimate
occurs, the change will be accounted for using the cumulative
catch-up method which provides for an adjustment to revenue in the
current period. Estimates of our level of effort may change in the
future, resulting in a material change in the amount of revenue
recognized in future periods.</p>
<p style="font-size:1px;margin-top:12px;margin-bottom:0px">
 </p>
<p style="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Generally, under collaboration arrangements, nonrefundable payments
received during the period of performance may include time- or
performance-based milestones. The proportion of actual performance
to total expected performance is applied to the “expected
payments” in determining periodic revenue. However, revenue
is limited to the sum of (i) the amount of nonrefundable cash
payments received and (ii) the payments that are contractually
due but have not yet been paid.</p>
<p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
With regard to revenue recognition in connection with development
and license agreements that include multiple deliverables,
Emisphere’s management reviews the relevant terms of the
agreements and determines whether such deliverables should be
accounted for as a single unit of accounting in accordance with
FASB ASC 605-25, <i>Multiple-Element Arrangements</i>. If it is
determined that a delivered license and Eligen <sup style="font-size:85%; vertical-align:top">®</sup> Technology do not
have stand-alone value and Emisphere does not have objective
evidence of fair value of the undelivered Eligen <sup style="font-size:85%; vertical-align:top">®</sup> Technology or the
manufacturing value of all the undelivered items, then such
deliverables are accounted for as a single unit of accounting and
any payments received pursuant to such agreement, including any
upfront or development milestone payments and any payments received
for support services, will be deferred and included in deferred
revenue within our balance sheet until such time as management can
estimate when all of such deliverables will be delivered, if ever.
Management reviews and reevaluates such conclusions as each item in
the arrangement is delivered and circumstances of the development
arrangement change.</p>
</div>
1868000
0.0182
254000
P6Y9M15D
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
Accounts payable and accrued expenses consist of the following:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="68%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30, 2016<br />
(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,<br />
2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center"><b>(In
thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accounts payable</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">431</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1,762</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued legal, professional and other fees</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">285</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">304</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued vacation</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">57</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">55</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">773</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">2,121</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
Notes payable, related party, net of related discounts, consists of
the following:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="68%"></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">
<b>September 30, 2016</b><br />
<b>(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center"><b>(in
thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Convertible Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">39,067</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">37,450</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Loan Agreement</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">24,342</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">22,801</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Bridge Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">106</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">166</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Reimbursement Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">794</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">755</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">64,309</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">61,172</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Less: Current portion</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7,000</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7,000</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Non-current notes payable, net of related discounts</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">57,309</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">54,172</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
60687478
50000000
0.75
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>6. Prepaid Expenses and Other Current Assets</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
Prepaid expenses and other current assets consist of the
following:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="68%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">
<b>September 30, 2016</b><br />
<b>(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center"><b>(in
thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Prepaid corporate insurance</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">40</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">93</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Deposit on inventory</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">184</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Prepaid expenses and other current assets</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">154</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">804</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">194</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1,081</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
2017
0.75
P24M
0.02
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
<b>1. Nature of Operations and Liquidity</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
<b>Nature of Operations.</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
Emisphere Technologies, Inc. (“Emisphere,” “the
Company,” “our,” “us,” or
“we”) is a commercial stage pharmaceutical and drug
delivery company. We are in partnership with global pharmaceutical
companies to develop new formulations of existing products, as well
as new chemical entities, using our Eligen<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> Technology. We launched our
first prescription medical food product, oral Eligen B12 in the
U.S. in March 2015, and we are currently engaged in strategic
discussions to optimize its economic value in the U.S. and global
markets. Beyond Eligen B12, we utilize our proprietary
Eligen <sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> Technology to create new oral
formulations of therapeutic agents. Our product pipeline includes
prescription drug and medical food product candidates that are
being developed in partnership or internally.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
Our core business strategy is to build new, high-value partnerships
and expand upon our existing partnerships, to enter into strategic
transactions or alliances to realize the full economic potential of
the oral Eligen B12 product, evaluate commercial opportunities for
new prescription medical foods, and promote new uses for our
Eligen<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> Technology, a broad based
proprietary oral drug delivery platform which makes it possible to
avoid injections for drug administration through the use of
delivery agents, or carriers, which facilitate or enable transport
of therapeutic molecules, including large peptides and proteins,
across biological membranes such as those of the gastrointestinal
tract.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
<b>Liquidity and Capital Resources</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
Since our inception in 1986, we have generated significant losses
from operations and we anticipate that we will continue to generate
significant losses from operations for the foreseeable future, and
that in order to continue as a going concern, our business will
require substantial additional investment that we have not yet
secured.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
As of September 30, 2016, our accumulated deficit was
approximately $569.1 million; our stockholder’s deficit was
$166.2 million. Net loss was $5.2 million compared to a net loss of
$4.4 million for the three months ended September 30, 2016 and
2015, respectively; our net loss was $14.5 million and $30.3
million for the nine months ended September 30, 2016 and 2015,
respectively. On September 30, 2016 we had approximately $7.5
million in cash. We have limited capital resources and operations
to date have been funded with the proceeds from collaborative
research agreements, private and public debt and equity financings
and income earned on investments.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
As of September 30, 2016, our financial obligations included
approximately $49.7 million (face value) under our Second Amended
and Restated Convertible Notes (the “Convertible
Notes”), approximately $24.3 million (face value) under a
loan agreement entered into on August 20, 2014 (the
“Loan Agreement”), approximately $0.8 million (face
value) under our Second Amended and Restated Reimbursement Notes
(the “Reimbursement Notes”), and approximately $2.3
million (face value) under our Second Amended and Restated Bridge
Notes (the “Bridge Notes”). The Convertible Notes and
the Loan Agreement are subject to annual net sales performance
targets.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
Under the terms of the Loan Agreement, described in Note 9 to the
Financial Statements, we borrowed an aggregate of $20.0 million to
finance the development, manufacturing, marketing and sales of our
oral Eligen B12 Rx Product. The loan facility will mature on
December 31, 2019 and bears interest at a rate of 13% per
year. In the event that we do not satisfy annual net sales targets
of Eligen B12 by December 31 for each fiscal year beginning
2015 through 2019, we will be in default under the Loan Agreement.
We do not anticipate meeting the annual sales target at
December 31, 2016, however, the Company is currently in
discussions with the creditor for a permanent waiver of this
condition.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
On October 26, 2015, we received a total payment of $14
million from Novo Nordisk pursuant to, and consisting of, $5
million as payment for entry into the Expansion License Agreement
and $9 million as prepayment of a product development milestone and
in exchange for a reduction in certain future royalty payments that
may have become due and payable under the terms of our GLP-1
Development License Agreement with Novo Nordisk.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
Under the terms of our loan agreements, we are obligated to pre-pay
certain loans and notes using 50% of any extraordinary receipts,
such as the $14 million received from Novo Nordisk. The creditor
under our Loan Agreement and Reimbursement Notes has agreed to
extend the date by which we are required to use 50% of the $14
million received from Novo Nordisk to pre-pay certain loans and
notes until November 15, 2016. Because the Loan Prepayment
deadline has not been extended beyond one year from
September 30, 2016, we have classified $7.0 million of the
loans and notes as a current liability as of September 30,
2016.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
We believe that our current cash balance will provide sufficient
capital to continue operations through November 2016. However, if
the pre-payment obligation is further extended or waived, the
Company will have sufficient cash to operate through approximately
December 2017. The Company’s future capital requirements
beyond November 2016 (or December 2017, in the event the
pre-payment obligation is further extended or waived) and our
financial success depend largely on our ability to raise additional
capital, including by leveraging existing and securing new
partnering opportunities for Eligen B12 and the Eligen<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> Technology.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12px; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal">
While our plan is to raise capital from product partnering
opportunities and/or commercial operations to address our capital
deficiencies and meet our operating cash requirements, there is no
assurance that our plans will be successful. If we fail to generate
sufficient capital from commercial operations or partnerships, we
will need to seek capital from other sources and risk default under
the terms of our existing loans. We cannot assure you that
financing will be available on favorable terms or at all. If we
fail to obtain substantial cash inflows from existing or new
partners or other sources prior to November 2016 (or December 2017,
in the event the prepayment obligations is further extended or
waived), we could be forced to cease operations. Additionally, if
additional capital is raised through the sale of equity or
convertible debt securities, the issuance of such securities would
result in dilution to our existing stockholders. These conditions
raise substantial doubt about our ability to continue as a going
concern. Consequently, the audit reports prepared by our
independent registered public accounting firm relating to our
financial statements for the years ended December 31, 2015,
2014 and 2013 include an explanatory paragraph expressing
substantial doubt about our ability to continue as a going concern.
Furthermore, despite our optimism regarding the Eligen<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> Technology, even in the event
that the Company is adequately funded, there is no guarantee that
any of our partnerships will be successful, that any of our
products or product candidates will perform as hoped or that such
products will be successfully commercialized.</p>
</div>
2256000
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>3. Revenue Recognition</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<i>Oral Eligen B12™ Rx Product</i></p>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
We sell our oral Eligen B12™ Rx product through drug
wholesalers and retail pharmacies. We recognize revenue from
prescription product sales, net of sales discounts, chargebacks,
and rebates. We accept returns of unsalable product from customers
within a return period of six months prior to and 12 months
following product expiration. Our oral Eligen B12™ Rx product
currently has a shelf life of 24 months from the date of
manufacture. Given the limited history of our oral Eligen
B12™ Rx product, we currently cannot reliably estimate
expected returns of the prescription products at the time of
shipment. Accordingly, we will defer recognition of revenue on
prescription products until the right of return no longer exists,
which occurs at the earlier of the time the oral Eligen B12™
Rx product is dispensed through patient prescriptions or expiration
of the right of return.</p>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<i>Collaborative Agreements and Feasibility Studies</i></p>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Revenue earned from collaborative agreements and feasibility
studies is comprised of reimbursed research and development costs,
as well as upfront and research and development milestone payments.
Deferred revenue represents payments received which are related to
future performance. Revenue from feasibility studies, which are
typically short term in nature, is recognized upon delivery of the
study, provided that all other revenue recognition criteria are
met.</p>
<p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Revenue from collaboration agreements are recognized using the
proportional performance method provided that we can reasonably
estimate the level of effort required to complete our performance
obligations under an arrangement and such performance obligations
are provided on a best effort basis and based on “expected
payments.” Under the proportional performance method,
periodic revenue related to nonrefundable cash payments is
recognized as the percentage of actual effort expended to date as
of that period to the total effort expected for all of our
performance obligations under the arrangement. Actual effort is
generally determined based upon actual hours incurred and include
research and development (“R&D”) activities
performed by us and time spent for Joint Steering Committee
(“JSC”) activities. Total expected effort is generally
based upon the total R&D and JSC hours incorporated into the
project plan that is agreed to by both parties to the
collaboration. Significant management judgments and estimates are
required in determining the level of effort required under an
arrangement and the period over which we expect to complete the
related performance obligations. Estimates of the total expected
effort included in each project plan are based on historical
experience of similar efforts and expectations based on the
knowledge of scientists for both the Company and its collaboration
partners. The Company periodically reviews and updates the project
plan for each collaborative agreement. The most recent reviews took
place in January 2016. In the event that a change in estimate
occurs, the change will be accounted for using the cumulative
catch-up method which provides for an adjustment to revenue in the
current period. Estimates of our level of effort may change in the
future, resulting in a material change in the amount of revenue
recognized in future periods.</p>
<p style="font-size:1px;margin-top:12px;margin-bottom:0px">
 </p>
<p style="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Generally, under collaboration arrangements, nonrefundable payments
received during the period of performance may include time- or
performance-based milestones. The proportion of actual performance
to total expected performance is applied to the “expected
payments” in determining periodic revenue. However, revenue
is limited to the sum of (i) the amount of nonrefundable cash
payments received and (ii) the payments that are contractually
due but have not yet been paid.</p>
<p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
With regard to revenue recognition in connection with development
and license agreements that include multiple deliverables,
Emisphere’s management reviews the relevant terms of the
agreements and determines whether such deliverables should be
accounted for as a single unit of accounting in accordance with
FASB ASC 605-25, <i>Multiple-Element Arrangements</i>. If it is
determined that a delivered license and Eligen <sup style="font-size:85%; vertical-align:top">®</sup> Technology do not
have stand-alone value and Emisphere does not have objective
evidence of fair value of the undelivered Eligen <sup style="font-size:85%; vertical-align:top">®</sup> Technology or the
manufacturing value of all the undelivered items, then such
deliverables are accounted for as a single unit of accounting and
any payments received pursuant to such agreement, including any
upfront or development milestone payments and any payments received
for support services, will be deferred and included in deferred
revenue within our balance sheet until such time as management can
estimate when all of such deliverables will be delivered, if ever.
Management reviews and reevaluates such conclusions as each item in
the arrangement is delivered and circumstances of the development
arrangement change.</p>
</div>
0.50
0.14523
20000
7940000
6219100
45824469
21997775
40000
0.61
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
The assumptions used in computing the fair value of the Amended and
Restated June 2010 Warrants as of September 30, 2016 and
December 31, 2015, are as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="72%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30,</b><br />
<b>2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Closing stock price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.70</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.68</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">107</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">136</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Remaining term (years)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2.77</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3.52</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Risk-free rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0.85</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.42</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected dividend yield</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
</table>
</div>
0.00
-100000
1.07
0.0085
P2Y9M7D
0.50
2019-07-08
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The assumptions used in computing the fair values as
September 30, 2016 and December 31, 2015, are as
follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="72%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30,</b><br />
<b>2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Closing stock price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.70</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.68</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1.25</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1.25</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">146</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">143</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Remaining term (years)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5.5</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6.25</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Risk-free rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.20</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.95</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected dividend yield</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
</table>
</div>
0.00
1500000
1.46
0.0120
P5Y6M
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The assumptions used in computing the fair value as of
September 30, 2016 and December 31, 2015 are as
follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="72%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30,<br />
2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Closing stock price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.70</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.68</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">146</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">143</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Remaining term (years)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6.25</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Risk-free rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.20</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.95</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected dividend yield</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
</table>
</div>
0.00
400000
1.46
0.0120
P5Y6M
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The assumptions used in computing the fair value as of
September 30, 2016 and December 31, 2015 are as
follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="72%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30,</b><br />
<b>2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Closing stock price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.70</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.68</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">146</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">143</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Remaining term (years)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6.25</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Risk-free rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.20</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.95</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected dividend yield</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
</table>
</div>
0.00
200000
1.46
0.0120
P5Y6M
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
The assumptions used in computing the fair value of the 2013
Restructuring Warrants as of September 30, 2016 and
December 31, 2015, are as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="72%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30,</b><br />
<b>2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Closing stock price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.70</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.68</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">107</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">141</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Remaining term (years)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2.77</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3.52</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Risk-free rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0.88</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.31</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected dividend yield</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
</table>
</div>
0.00
1.07
0.0088
P2Y9M7D
900000
2015-08-26
200000
3010000
2016-07-06
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The assumptions used in computing the fair value of the Original
Warrants as of September 30, 2016 and December 31, 2015,
are as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="72%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September 30,</b><br />
<b>2016</b></td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,</b><br />
<b>2015</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Closing stock price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.70</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.68</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.50</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">107</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">141</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Remaining term (years)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2.77</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3.52</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Risk-free rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0.88</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.31</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected dividend yield</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
</table>
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0.00
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0.0088
P2Y9M7D
39720243
2022-03-31
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0.50
2014-08-20
(i) five percent (5%) of all Net Sales and third party payments commencing with the first quarter immediately following the quarter in which the Indebtedness Repayment Condition is satisfied, or (ii) two and one half percent (2.5%) of all Net Sales commencing with the quarter immediately following the quarter in which the Indebtedness Repayment Condition is satisfied, but only with respect to the Net Sales made in any country in which there was not a Valid Patent Claim (as defined in the Royalty Agreement) and where generic entry of a competitive product not by the Company or its affiliates that does not infringe a Valid Patent Claim in such country has occurred, in each case as of the last day of such Fiscal Quarter.
P6M
P3Y
P1Y
P1Y
P12M
P7Y
Term of lease
2013-05-07
0.02
The Bridge Notes were amended and restated on May 7, 2013 and restated again on August 20, 2014.
Interest at 13% per year, compounded monthly and payable in the form of additional Bridge Notes.
2022-03-31
0.50
0.50
Interest at the rate of 10% per annum, compounded monthly, which interest is payable in the form of additional Reimbursement Notes.
2022-03-31
2014-08-20
0.50
2019-12-31
0.50
7079000
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1.36
0.0142
P3Y6M7D
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1.43
0.0195
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