3.78
20000000
5000000
3000000
0.005
60852478
5000000
600000
2000000
12900000
0.11
15000000
1400000
10360000
789000
0.01
14336000
0.13
60852478
61142210
5182000
34000
5158000
400000000
406616000
4639000
239000
611000
55616000
444000
194000
311000
33069000
27709000
37000
0.01
4000000
82000
68089000
0
50000
0
160441000
5182000
6578000
37000
68089000
-155259000
300000
9309476
-558497000
3170016
37000
289732
230000
3952000
0
24000
27474000
0
2000
15000000
10000000
148000
5595000
2682000
5360000
27709000
53000000
2400000
800000
234000
764000
0.47
0.50
10000000
24053000
0.47
1.25
2541000
0.47
0.50
880000
0.47
0.50
10000000
0.47
0.50
946000
665000
2537000
202000
247000
0.47
0.50
0.13
53000000
1.25
41003000
1700000
0.025
0.20
0.05
2412000
0.13
2400000
81000
100000
836000
0.10
800000
0.50
795000
21000
26200000
26210000
26200000
26211000
900000
52966000
5000000
12898000
35623000
869000
0.01
14629000
60687478
60977210
6584000
29000
6560000
400000000
406495000
6085000
301000
610000
55616000
638000
513000
202000
43194000
35195000
0.01
4000000
86000
67589000
0
67000
167992000
6584000
9725000
67589000
-161408000
-564561000
289732
107000
3952000
0
24000
34851000
5000
21000
206000
8343000
7999000
35195000
344000
1139000
0.60
0.50
30559000
4027000
0.60
1.25
3187000
297000
0.60
0.50
1105000
41000
0.60
0.50
0.60
0.50
1412000
993000
3785000
301000
369000
0.60
0.50
40699000
2412000
91000
836000
795000
26004000
26004000
52966000
5
0.50
5000000
6200000
800000
7000000
2007-04-20
4824006
1671632
206000
3010000
2016-07-06
-4793000
0.00
1.03
0.0133
P2Y6M7D
0.50
2019-07-08
0.00
1.46
0.0195
P5Y3M
0.00
1.46
0.0195
P5Y3M
0.00
1.46
0.0195
P5Y3M
0.00
1.03
0.0147
P2Y6M7D
0.00
1.03
0.0147
P2Y6M7D
EMISPHERE TECHNOLOGIES INC
-7486000
45989002
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; MARGIN-TOP: 0pt">
<b>8. Notes Payable</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
Notes payable, 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="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; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>March 31, 2017<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 />
2016</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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; PAGE-BREAK-INSIDE: avoid" 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">$</td>
<td valign="bottom" align="right">41,003</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">40,699</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">26,210</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">26,004</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1pt">
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">
Reimbursement Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">795</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">795</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1pt">
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">81</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">91</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; PAGE-BREAK-INSIDE: avoid" 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">
<font style="WHITE-SPACE: nowrap">Non-current</font> notes payable,
net of related discount</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">68,089</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">67,589</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">
<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: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In 2014, we accounted for the modifications to the Company’s
obligations to MHR evidenced by the MHR Notes, as defined below, as
a troubled debt restructuring under FASC ASC <font style="WHITE-SPACE: nowrap">470-60.</font> As there was only a
modification of terms to the existing debt and we did not transfer
any assets or equity in a settlement to MHR no gain or loss was
recorded on the transaction. The change in cash outflows resulting
from the modification of terms are accounted for on a prospective
basis.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Loan Agreement provided for five borrowings (each, a
“Borrowing”, and collectively, the “Loan”)
totaling $20 million. The first Borrowing occurred on
August 20, 2014 in an original principal amount of
$5 million, the second occurred on November 4, 2014, in
an original principal amount of $3 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.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
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. 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 Agreement provides for certain
representations and warranties, affirmative and negative covenants
of the Company and Events of Default.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
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, MHR 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, as defined below, and <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">Paid-In-Kind</font></font> Royalties, as
defined below, due under the Loan Agreement with the
Company’s intellectual property relating to the B12 Product
and related products. As of March 31, 2017, the principal
balance and accrued interest of the Loan Agreement was
approximately $26.2 million and $0.9 million,
respectively.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 8pt; TEXT-INDENT: 4%">
<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 amended its
certificate of incorporation in January 2006 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 amended and restated a second time
on August 20, 2014 as described below.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 8pt; TEXT-INDENT: 4%">
The August 20, 2014 amended and restated Convertible Notes
provide for a maturity date of March 31, 2022 (subject to
acceleration upon the occurrence of certain specified events of
default). 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, as defined below. 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. As of March 31, 2017, the principal balance and
accrued interest of the Convertible Notes was approximately
$53.0 million and $1.7 million, respectively; and the
Convertible Notes were convertible into 42,373,002 shares of our
common stock.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 8pt; TEXT-INDENT: 4%">
<b>Reimbursement Notes.</b> On June 8, 2010, the Company
issued the predecessor to the Reimbursement Notes to MHR in the
form of certain <font style="WHITE-SPACE: nowrap">non-interest</font> 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 <font style="WHITE-SPACE: nowrap">non-disturbance</font> 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 amended and
restated again on August 20, 2014 as described below.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 8pt; TEXT-INDENT: 4%">
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. As of
March 31, 2017, the principal balance and accrued interest of
the Reimbursement Notes was $0.8 million and
$21 thousand, respectively; and the Reimbursement Notes were
convertible into 1,671,632 shares of our common stock.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 8pt; TEXT-INDENT: 4%">
<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 as described
below.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 8pt; TEXT-INDENT: 4%">
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. As of March 31, 2017, the
principal balance and accrued interest of the Bridge Notes was
approximately $2.4 million and $0.1 million,
respectively; and the Bridge Notes were convertible into 4,824,006
shares of our common stock.</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; TEXT-INDENT: 4%">
<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. Under certain
conditions including the full settlement of the Loan Agreement, the
royalty rate may reduce to 5% or 2.5%.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
If the Company does not have sufficient cash in excess of the
Minimum Cash Balance to pay any Royalties that become due under the
Royalty Agreement in cash, such Royalties will be converted to an
additional Loan under the Loan Agreement by increasing the
principal amount outstanding under the Loan Agreement (any such
Loan, <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">“Paid-In-Kind</font></font>
Royalties”). The “Minimum Cash Balance” generally
means cash on hand of at least $10 million (or
$15 million, under certain circumstances beginning as early as
October 1, 2015). The royalty payable as of December 31,
2016 in the amount of $206 thousand was converted to an
additional loan under the Loan Agreement on January 30,
2017.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<b>December 2016 Debt Modifications</b>. On December 8, 2016,
the Company entered a series of agreements with MHR pursuant to
which MHR agreed to (1) waive the Company’s previous
obligation to <font style="WHITE-SPACE: nowrap">pre-pay</font>
$0.8 million of the Reimbursement Notes and $6.2 million
of the Loans, (2) waive any and all rights to the Royalties
for the year ended December 31, 2015, (3) waive the 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 B12 Product or related products
if such proceeds are actually received by the Company prior to the
earlier of (i) October 31, 2018 and (ii) the date
immediately following the date that the Company actually receives
such proceeds during any consecutive twelve month period in excess
of $5 million in the aggregate, (4) waive any events of
default as a result of the Company’s failure to meet the
Eligen B12™ net sales targets that have already occurred or
may occur in the future, (5) forgive an amount equal to
$7 million of the outstanding principal of the Loan Agreement
upon the first commercial sale in the United States or European
Union (including the United Kingdom) of a licensed product under
the Development and License Agreement, dated June 21, 2008
(the <font style="WHITE-SPACE: nowrap">“GLP-1</font> License
Agreement” with Novo Nordisk.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In consideration of the above modifications, the Company granted to
MHR, among other things, a portion of any royalties payable under
the terms of the <font style="WHITE-SPACE: nowrap">GLP-1</font>
Agreement equal to 0.5% of net sales for any licensed product
subject to the GLP <font style="WHITE-SPACE: nowrap">-1</font>
Agreement.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
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="66%"></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>March 31, 2017</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, 2016</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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; PAGE-BREAK-INSIDE: avoid">
<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; PAGE-BREAK-INSIDE: avoid" 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 Convertible Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">52,966</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">52,966</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">26,211</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">26,004</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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 Reimbursement Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">836</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">836</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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 Bridge Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,412</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,412</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">(14,336</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(14,629</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; PAGE-BREAK-INSIDE: avoid">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">68,089</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">67,589</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>
2017-03-31
-1446000
84000
2017
<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 March 31, 2017 and December 31, 2016.</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="82%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>March 31,</b><br />
<b>2017</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>2016</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">35,195</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: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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" 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">297</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">41</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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" 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">4,027</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">(7,486</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(4,793</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; PAGE-BREAK-INSIDE: avoid">
<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">27,709</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">35,195</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
1181000
0.10
-7510000
2006-05-16
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>9. 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="66%"></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>March 31, 2017</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, 2016</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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; PAGE-BREAK-INSIDE: avoid">
<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; PAGE-BREAK-INSIDE: avoid" 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">24,053</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">30,559</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">880</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,105</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">2,541</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,187</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">946</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,412</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">234</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">344</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">665</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">993</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">247</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">369</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">764</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,139</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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 July 2011 MHR Waiver Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">202</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">301</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">2,537</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,785</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; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">33,069</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">43,194</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: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<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 <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">815-40-15-5,</font></font></font>
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 <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">815-10-15</font></font> and thus needs to be
accounted for as a derivative liability. The liabilities associated
with the MHR Notes has been presented as a <font style="WHITE-SPACE: nowrap">non-current</font> liability as of
March 31, 2017 and December 31, 2016, 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 raises
$10 million through the issuance of common stock or common
stock equivalents during any consecutive 24 month period. The fair
value of the embedded conversion feature of the Convertible Notes
is estimated at the end of each quarterly reporting period using
the Monte Carlo model. The assumptions used in computing the fair
values as March 31, 2017 and December 31, 2016, are as
follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="76%"></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>March 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2017</b></p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>December 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2016</b></p>
</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Closing stock price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.47</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.60</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</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; PAGE-BREAK-INSIDE: avoid" 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">127</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">146</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">5.00</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5.25</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">1.91</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; PAGE-BREAK-INSIDE: avoid">
<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 decreased $6.5 million and $1.6 million
for the three months ended March 31, 2017 and 2016,
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>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
March 31, 2017 and December 31, 2016 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="76%"></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; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>March 31</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2017</b></p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>December 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2016</b></p>
</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">0.47</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.60</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</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; PAGE-BREAK-INSIDE: avoid" 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">127</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">146</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">5.00</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5.25</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">1.91</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; PAGE-BREAK-INSIDE: avoid">
<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 decreased $0.2 million and $50 thousand for the
three months ended March 31, 2017 and 2016, 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>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 March 31,
2017 and December 31, 2016 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="76%"></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; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>March 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2017</b></p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>December 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2016</b></p>
</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">0.47</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.60</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</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; PAGE-BREAK-INSIDE: avoid" 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">127</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">146</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">5.00</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5.25</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">1.91</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; PAGE-BREAK-INSIDE: avoid">
<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 decreased $0.6 million and $0.1 million for the
three months ended March 31, 2017 and 2016, 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 June 2010 Warrants.</b> In June 2010, the
Company granted warrants to MHR to purchase 865,000 shares of its
common stock (the “June 2010 Warrants”). In connection
with the restructuring of certain of the Company’s
indebtedness (the “Restructuring”), on May 7,
2013, the Company amended and restated the Original Warrants, as
defined below, 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 and until the
Company raises $10 million through the issuance of common
stock or common stock equivalents at a price which is lower than
the current conversion price of these warrants and lower than the
current market price during any consecutive <font style="WHITE-SPACE: nowrap">24-month</font> period. The fair value of the
Amended and Restated June 2010 Warrants is estimated at the end of
each quarterly reporting period using the Monte Carlo model. The
assumptions used in computing the fair value of the Amended and
Restated June 2010 Warrants as of March 31, 2017 and
December 31, 2016, are as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="76%"></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>March 31,<br />
2017</b></td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>December 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2016</b></p>
</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Closing stock price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.47</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.60</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</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; PAGE-BREAK-INSIDE: avoid" 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">100</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">103</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">2.27</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2.52</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">1.32</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.33</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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 Warrants
decreased $0.1 million for the three months ended
March 31, 2017 and 2016, 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
March 31, 2017 and December 31, 2016, 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="76%"></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; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>March 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2017</b></p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>December 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2016</b></p>
</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">0.47</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.60</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</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; PAGE-BREAK-INSIDE: avoid" 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">100</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">103</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">2.27</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2.52</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">1.28</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.47</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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 $1.4 million
and $0.8 million for the three months ended March 31,
2017 and 2016, 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>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 March 31, 2017 and
December 31, 2016, 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="76%"></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; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>March 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2017</b></p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>December 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2016</b></p>
</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">0.47</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.60</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</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; PAGE-BREAK-INSIDE: avoid" 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">100</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">103</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">2.27</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2.52</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">1.28</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.47</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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
$1.2 million and $0.8 million for the three months ended
March 31, 2017 and 2016, 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> Emisphere sold warrants
to purchase 3.01 million shares of common stock to unrelated
investors in July 2011 (the “July 2011 Warrants”). The
July 2011 Warrants expired on July 6, 2016.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The fair value of the July 2011 Warrants decreased
$0.1 million for the three months ended March 31, 2016,
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 <font style="white-space:nowrap">non-employee</font> directors,
consultants and others who provide substantial services to us. The
2007 Plan provides for the issuance of an aggregate of 9,309,476.
As of March 31, 2017, 3,170,016 shares were available for
future grants under the 2007 Plan which expired on April 20,
2017.</p>
<p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Total compensation expense recorded during the three months ended
March 31, 2017 for share-based payment awards was
$84 thousand. At March 31, 2017, total unrecognized
estimated compensation expense related to <font style="white-space:nowrap">non-vested</font> stock options granted prior
to that date was $0.3 million which is expected to be
recognized over a weighted-average period of approximately 1.5
years. During the three months ended March 31, 2017, 165,000
options were exercised. Total proceeds from exercised options were
$37 thousand. No cash has been collected from the exercise of
these options as of March 31, 2017. The receivable has been
recorded under a contra-equity account as a subscription
receivable. 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 three months ended March 31, 2017, the Company
granted 100,000 options to Alan Rubino, Chief Executive Officer
(valued on the grant date at $0.44 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 three months ended
March 31, 2017:</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="page-break-inside:avoid ; 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">143.19</td>
<td nowrap="nowrap" valign="bottom">% </td>
</tr>
<tr style="page-break-inside:avoid ; 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="page-break-inside:avoid ; 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">2.27</td>
<td nowrap="nowrap" valign="bottom">% </td>
</tr>
<tr style="page-break-inside:avoid ; 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="page-break-inside:avoid ; 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
Q1
0.04
<div>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Prepaid expenses and other current assets consist of the
following:</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="76%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="72%"></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">
<b>March 31, 2017</b><br />
<b>(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000"><b>December 31,</b><br />
<b>2016</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<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 bgcolor="#CCEEFF" style="page-break-inside:avoid ; 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">
Prepaid corporate insurance</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">82</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">86</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Prepaid expenses and other current assets</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">148</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">21</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">230</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">107</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
Smaller Reporting Company
47000
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>14. 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
March 31, 2017 and December 31, 2016:</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="62%"></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; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom" nowrap="nowrap">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>March 31, 2017</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; WIDTH: 53.1pt; 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; PAGE-BREAK-INSIDE: avoid">
<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; PAGE-BREAK-INSIDE: avoid" 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">5,360</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">27,709</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">33,069</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; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom" nowrap="nowrap">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>December 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; WIDTH: 46.65pt; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt">
<b>2016</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; PAGE-BREAK-INSIDE: avoid">
<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; PAGE-BREAK-INSIDE: avoid" 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">$</td>
<td valign="bottom" align="right">7,999</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">35,195</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">43,194</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 March 31, 2017 and December 31, 2016.</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="82%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>March 31,</b><br />
<b>2017</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>2016</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">35,195</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: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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" 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">297</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">41</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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" 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">4,027</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">(7,486</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(4,793</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; PAGE-BREAK-INSIDE: avoid">
<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">27,709</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">35,195</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-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>10. Commitments and Contingencies</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<i>Commitments.</i></p>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
We lease office space at 4 Becker Farm Road, Roseland, New Jersey
under a <font style="white-space:nowrap">non-cancellable</font>
operating lease expiring in 2017.</p>
<p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
As of March 31, 2017, future minimum rental payments are as
follows:</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="84%"></td>
<td valign="bottom" width="14%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom" nowrap="nowrap">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-bottom:1.00pt solid #000000; width:95.55pt; font-size:8pt; font-family:Times New Roman">
<b>Years Ending December 31,</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">
<b>(In thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; 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">
2017 (remaining)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">37</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; 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">
Total</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">37</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
<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">
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-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<i>Contingencies.</i></p>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
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 March 31, 2017.</p>
<p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
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-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
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 8). 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 <font style="white-space:nowrap"><font style="white-space:nowrap">Paid-In-Kind</font></font> 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
<font style="white-space:nowrap"><font style="white-space:nowrap">Paid-In-Kind</font></font> Royalties.</p>
</div>
<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; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
<b>13. New Accounting Pronouncements</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; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
In July 2015, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2015-11,</font> “Simplifying the
Measurement of Inventory” (“ASU <font style="WHITE-SPACE: nowrap">2015-11”).</font> ASU <font style="WHITE-SPACE: nowrap">2015-11</font> requires that inventory within
the scope of the guidance be measured at the lower of cost and net
realizable value. Inventory measured using <font style="WHITE-SPACE: nowrap">last-in,</font> <font style="WHITE-SPACE: nowrap">first-out</font> 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 adoption of
ASU <font style="WHITE-SPACE: nowrap">2015-11</font> 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"; 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; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
In March 2016, FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2016-09,</font> “Improvements to
Employee Share-based Payment Accounting”
(“ASU <font style="WHITE-SPACE: nowrap">2016-09”).</font> ASU <font style="WHITE-SPACE: nowrap">2016-09</font> 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 <font style="WHITE-SPACE: nowrap">2016-09</font> is effective for annual
periods beginning after December 15, 2016, and interim periods
within those annual periods. The Company adopted ASU 2016-09 on
January 1, 2017. The Company continues to estimate forfeitures of
employee share-based payments as allowed by ASU 2016-09. The
adoption of ASU 2016-09 resulted in the exclusion of excess tax
benefits used to calculate the hypothetical proceeds in the
calculation of diluted earnings per share under the treasury stock
method. The adoption of ASU 2016-09 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"; 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; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
In March 2016, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2016-06,</font> “Contingent Put and Call
Option in Debt Instruments” (“ASU <font style="WHITE-SPACE: nowrap">2016-06”).</font> ASU <font style="WHITE-SPACE: nowrap">2016-06</font> is intended to simplify the
analysis of embedded derivatives for debt instruments that contain
contingent put or call options. The amendments in ASU <font style="WHITE-SPACE: nowrap">2016-06</font> 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 <font style="WHITE-SPACE: nowrap">2016-06</font> 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 adoption of ASU 2016–01 did not
have a significant impact on our financial statements.</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; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
In May 2014, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2014-09,</font> “Revenue from Contracts
with Customers” (“ASU <font style="WHITE-SPACE: nowrap">2014-09”),</font> 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. ASU <font style="WHITE-SPACE: nowrap">2014-09</font> is effective for the first
interim period within an annual period beginning after
December 15, 2017. 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.
Adoption can occur using one of two prescribed transition methods.
In 2016, the FASB issued four amendments to ASU <font style="WHITE-SPACE: nowrap">2014-09.</font> We have begun a limited
evaluation of the provisions of ASU <font style="WHITE-SPACE: nowrap">2014-09</font> and the impact, if any it may
have on our financial position and results of operations. Our
evaluation work to date includes the training of ASU <font style="WHITE-SPACE: nowrap">2014-09,</font> contract review and an
assessment of the distribution model for which we recognize revenue
for our Eligen B12™ product. We have a small number of
contracts which require an assessment and believe we have
sufficient time for the implementation of ASU <font style="WHITE-SPACE: nowrap">2014-09.</font></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; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
During January 2016, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2016-01,</font> “Financial Instruments
— Overall: Recognition and Measurement of Financial Assets
and Financial Liabilities (“ASU <font style="WHITE-SPACE: nowrap">2016-01”).</font> 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 <font style="WHITE-SPACE: nowrap">2016-01</font> 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"; 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; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
During February 2016, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2016-02,</font> “Leases”
(“ASU <font style="WHITE-SPACE: nowrap">2016-02”).</font> 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 <font style="WHITE-SPACE: nowrap">2016-02</font> is effective for fiscal years
beginning after December 15, 2018, including interim periods
within those fiscal years. The adoption of ASU <font style="WHITE-SPACE: nowrap">2016-02</font> is not expected to have a
material impact on our financial position, results of operations or
cash flows due to an insignificant number of leases that the
Company has entered into.</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; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
In August 2016, FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2016-15,</font> “Classification of
Certain Cash Receipts and Cash Payments”
(“ASU <font style="WHITE-SPACE: nowrap">2016-15”).</font> ASU <font style="WHITE-SPACE: nowrap">2016-15</font> clarifies the presentation and
classification of certain cash receipts and cash payments in the
statement of cash flows. ASU <font style="WHITE-SPACE: nowrap">2016-15</font> 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 <font style="WHITE-SPACE: nowrap">No. 2016-15</font> to have a material impact on
its financial statements.</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; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
 </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; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
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>
<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: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
<b>11. Net income (loss) per share</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; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
The following table sets forth the information needed to compute
basic and diluted earnings (loss) per share:</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; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
 </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; text-decoration-style: initial; text-decoration-color: initial" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="79%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="6" align="center">
<b>Three Months Ended</b><br />
<b>March 31,</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<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>2017</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>2016</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="6" align="center">
<b>(in thousands except per share data)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" 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">
Basic net income (loss)</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">6,064</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(1,829</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<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">
Effect of dilutive securities —<br />
Change in Fair Value of Derivative-Warrants</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(2,748</td>
<td valign="bottom" nowrap="nowrap">) </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>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" 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 of Derivative-Convertible Notes</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(870</td>
<td valign="bottom" nowrap="nowrap">) </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>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<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 Debt- Interest</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">90</td>
<td valign="bottom" nowrap="nowrap"> </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>
</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"; break-inside: avoid" 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">
Numerator for diluted net income (loss) per share after effect of
change in fair value</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">2,536</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(1,829</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>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<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">
Weighted average common shares outstanding:</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">60,714,978</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">60,687,478</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" 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">
Dilutive securities</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"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Options</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,492,496</td>
<td valign="bottom" nowrap="nowrap"> </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>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Warrants</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">431,329</td>
<td valign="bottom" nowrap="nowrap"> </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>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Shares underlying convertible debt instruments</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,495,638</td>
<td valign="bottom" nowrap="nowrap"> </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>
</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"; break-inside: avoid" 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">
Diluted weighted average common shares outstanding and assumed
conversion</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">69,134,441</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">60,687,478</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>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<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">
Basic net income (loss) per share</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.10</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.03</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Diluted net income (loss) per share</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.04</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.03</td>
<td valign="bottom" nowrap="nowrap">) </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; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
For the three month periods ended March 31, 2017 and 2016,
certain potential shares of common stock have been excluded from
the calculation of diluted income per share because the exercise
price was greater than the average market price of our common
stock, and therefore, the effect on diluted income per share would
have been 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; 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; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
 </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; text-decoration-style: initial; text-decoration-color: initial" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="74%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="6" align="center">
<b>Three Months Ended</b><br />
<b>March 31,</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<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>2017</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>2016</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" 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">3,616,000</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,587,250</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<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" 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">25,008,082</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" 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 note payable</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">42,373,002</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">37,233,561</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<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 promissory 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">1,510,682</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" 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 bridge 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">4,229,826</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"; break-inside: avoid">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">45,989,002</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">74,569,401</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: 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: 18px; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
 </p>
</div>
P1Y6M
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>7. 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="72%"></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>March 31, 2017</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>2016</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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; PAGE-BREAK-INSIDE: avoid" 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">444</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">638</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued legal, professional and other fees</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">311</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">202</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued vacation</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">34</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">29</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">789</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">869</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>
222000
2976000
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>5. Inventory</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Inventory consists of finished goods at March 31, 2017 and
December 31, 2016.</p>
</div>
7150000
<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
March 31, 2017 and December 31, 2016:</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="62%"></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; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom" nowrap="nowrap">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>March 31, 2017</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; WIDTH: 53.1pt; 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; PAGE-BREAK-INSIDE: avoid">
<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; PAGE-BREAK-INSIDE: avoid" 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">5,360</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">27,709</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">33,069</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; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom" nowrap="nowrap">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>December 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; WIDTH: 46.65pt; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt">
<b>2016</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; PAGE-BREAK-INSIDE: avoid">
<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; PAGE-BREAK-INSIDE: avoid" 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">$</td>
<td valign="bottom" align="right">7,999</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">35,195</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">43,194</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
</table>
</div>
175000
<div>
<p style="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>12. 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 March 31, 2017 and December 31, 2016, the
Company had no accruals for interest or penalties related to income
tax matters.</p>
</div>
1261000
6064000
2000
-3000
-62000
2536000
123000
90000
-17000
-1086000
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.
-80000
-319000
6495638
<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, 2016 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 <font style="white-space:nowrap">10-K</font>
for the year ended December 31, 2016. Results of operations
for the three-month period ended March 31, 2017 are not
necessarily indicative of the operating results that may be
expected for the year ending December 31, 2017.</p>
</div>
-1446000
165000
69134441
<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 three months ended
March 31, 2017:</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="page-break-inside:avoid ; 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">143.19</td>
<td nowrap="nowrap" valign="bottom">% </td>
</tr>
<tr style="page-break-inside:avoid ; 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="page-break-inside:avoid ; 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">2.27</td>
<td nowrap="nowrap" valign="bottom">% </td>
</tr>
<tr style="page-break-inside:avoid ; 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="page-break-inside:avoid ; 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: 12pt">
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="76%" align="center" border="0">
<tr>
<td width="74%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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>March 31,</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2017</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>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">3,616,000</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,587,250</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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" 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">25,008,082</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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 note payable</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">42,373,002</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">37,233,561</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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 promissory 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">1,510,682</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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 bridge 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">4,229,826</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; PAGE-BREAK-INSIDE: avoid">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">45,989,002</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">74,569,401</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>
2017-04-20
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="66%"></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>March 31, 2017</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, 2016</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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; PAGE-BREAK-INSIDE: avoid">
<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; PAGE-BREAK-INSIDE: avoid" 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">24,053</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">30,559</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">880</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,105</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">2,541</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,187</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">946</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,412</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">234</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">344</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">665</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">993</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">247</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">369</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">764</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,139</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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 July 2011 MHR Waiver Warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">202</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">301</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">2,537</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,785</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; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">33,069</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">43,194</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>
60714978
<div>
<p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
As of March 31, 2017, future minimum rental payments are as
follows:</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="84%"></td>
<td valign="bottom" width="14%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom" nowrap="nowrap">
<p style="margin-top:0pt ; margin-bottom:0pt; border-bottom:1.00pt solid #000000; width:95.55pt; font-size:8pt; font-family:Times New Roman">
<b>Years Ending December 31,</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">
<b>(In thousands)</b></td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; 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">
2017 (remaining)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">37</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; 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">
Total</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">37</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
EMIS
2014-08-20
80000
0
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
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="66%"></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>March 31, 2017</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, 2016</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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; PAGE-BREAK-INSIDE: avoid">
<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; PAGE-BREAK-INSIDE: avoid" 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 Convertible Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">52,966</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">52,966</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">26,211</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">26,004</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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 Reimbursement Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">836</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">836</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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 Bridge Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,412</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,412</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">(14,336</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(14,629</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; PAGE-BREAK-INSIDE: avoid">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">68,089</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">67,589</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>
1.4319
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt">
<i>Oral Eligen B12™ Rx Product</i></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
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 36 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-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 18pt">
<i>Collaborative Agreements and Feasibility Studies</i></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
Revenue from collaboration agreements is 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 2017. In the event that a change in estimate
occurs, the change will be accounted for using the cumulative
<font style="WHITE-SPACE: nowrap">catch-up</font> 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="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
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-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
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 <font style="WHITE-SPACE: nowrap">605-25,</font>
<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>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
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>
</div>
0.0227
84000
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="72%"></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>March 31, 2017</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>2016</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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; PAGE-BREAK-INSIDE: avoid" 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">444</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">638</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued legal, professional and other fees</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">311</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">202</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued vacation</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">34</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">29</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">789</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">869</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, 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="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; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>March 31, 2017<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 />
2016</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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; PAGE-BREAK-INSIDE: avoid" 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">41,003</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">40,699</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">26,210</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">26,004</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1pt">
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">
Reimbursement Notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">795</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">795</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1pt">
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">81</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">91</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; PAGE-BREAK-INSIDE: avoid" 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">
<font style="WHITE-SPACE: nowrap">Non-current</font> notes payable,
net of related discount</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">68,089</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">67,589</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>
0.75
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>6. Prepaid Expenses and Other Current Assets</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Prepaid expenses and other current assets consist of the
following:</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="76%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="72%"></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">
<b>March 31, 2017</b><br />
<b>(unaudited)</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000"><b>December 31,</b><br />
<b>2016</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<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 bgcolor="#CCEEFF" style="page-break-inside:avoid ; 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">
Prepaid corporate insurance</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">82</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">86</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Prepaid expenses and other current assets</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">148</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">21</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">230</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">107</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
2017
<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: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
The following table sets forth the information needed to compute
basic and diluted earnings (loss) per share:</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; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial">
 </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; text-decoration-style: initial; text-decoration-color: initial" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="79%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="6" align="center">
<b>Three Months Ended</b><br />
<b>March 31,</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<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>2017</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>2016</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="6" align="center">
<b>(in thousands except per share data)</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" 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">
Basic net income (loss)</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">6,064</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(1,829</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<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">
Effect of dilutive securities —<br />
Change in Fair Value of Derivative-Warrants</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(2,748</td>
<td valign="bottom" nowrap="nowrap">) </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>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" 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 of Derivative-Convertible Notes</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(870</td>
<td valign="bottom" nowrap="nowrap">) </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>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<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 Debt- Interest</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">90</td>
<td valign="bottom" nowrap="nowrap"> </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>
</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"; break-inside: avoid" 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">
Numerator for diluted net income (loss) per share after effect of
change in fair value</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">2,536</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(1,829</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>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<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">
Weighted average common shares outstanding:</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">60,714,978</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">60,687,478</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" 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">
Dilutive securities</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"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Options</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,492,496</td>
<td valign="bottom" nowrap="nowrap"> </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>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Warrants</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">431,329</td>
<td valign="bottom" nowrap="nowrap"> </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>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Shares underlying convertible debt instruments</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,495,638</td>
<td valign="bottom" nowrap="nowrap"> </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>
</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"; break-inside: avoid" 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">
Diluted weighted average common shares outstanding and assumed
conversion</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">69,134,441</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">60,687,478</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>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<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">
Basic net income (loss) per share</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.10</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.03</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Diluted net income (loss) per share</p>
</td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.04</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.03</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
</table>
<br class="Apple-interchange-newline" />
</div>
P36M
0.02
<div>
<p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>1. Nature of Operations and Liquidity</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>Nature of Operations</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Emisphere Technologies, Inc. (“Emisphere”, the
“Company”, “we”, “us” or
“our”) 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:85%; 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:85%; 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-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Our core business strategy is to build new, high-value partnerships
and expand upon existing partnerships, pursue the global
commercialization of oral Eligen B12™ to optimize its
economic value, evaluate commercial opportunities for new
prescription medical foods, and promote new uses for our
Eligen<sup style="font-size:85%; vertical-align:top">®</sup>
Technology, a broadly applicable proprietary oral drug delivery
platform which makes it possible to avoid injections for drug
administration.</p>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>Liquidity and Capital Resources</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
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-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
As of March 31, 2017, our accumulated deficit was
approximately $558.5 million; our stockholder’s deficit
was $155.3 million. Our operating loss was $1.1 million
compared to an operating loss of $2.7 million for the three
months ended March 31, 2017 and 2016, respectively. On
March 31, 2017 we had approximately $4.6 million in cash.
We have limited capital resources and operations to date have been
funded with the proceeds from private and public debt and equity
financings, collaborative research agreements and income earned on
investments. As of March 31, 2017, our financial obligations
included approximately $53.0 million (face value) under our
Second Amended and Restated Convertible Notes (the
“Convertible Notes”), approximately $26.2 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 $2.4 million (face value)
under our Second Amended and Restated Bridge Notes (the
“Bridge Notes”).</p>
<p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Management has concluded that due to the conditions described
above, there is substantial doubt about our ability to continue as
a going concern through one year after the issuance of the
accompanying financial statements. We have evaluated the
significance of the conditions in relation to our ability to meet
our obligations and believe that our current cash balance will
provide sufficient capital to continue operations through
approximately March 2018. While our plan is to raise capital from
product partnering opportunities and 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
partnerships and commercial operations, 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. 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. Furthermore, despite our
optimism regarding the Eligen <sup style="font-size:85%; vertical-align:top">®</sup> Technology, even
in the event that the Company is adequately funded, there is no
guarantee that any of our or our partners’ products or
product candidates will perform as hoped or that such products can
be successfully commercialized.</p>
</div>
431329
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>3. Revenue Recognition</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt">
<i>Oral Eligen B12™ Rx Product</i></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
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 36 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-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 18pt">
<i>Collaborative Agreements and Feasibility Studies</i></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
Revenue from collaboration agreements is 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 2017. In the event that a change in estimate
occurs, the change will be accounted for using the cumulative
<font style="WHITE-SPACE: nowrap">catch-up</font> 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="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
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-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
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 <font style="WHITE-SPACE: nowrap">605-25,</font>
<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>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
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>
</div>
1492496
0.14523
10124000
-10124000
2976000
37000
-2748000
-870000
206000
3616000
42373002
100000
0.44
<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 Amended and
Restated June 2010 Warrants as of March 31, 2017 and
December 31, 2016, 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="76%"></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; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>March 31,<br />
2017</b></td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>December 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2016</b></p>
</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">0.47</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.60</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</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; PAGE-BREAK-INSIDE: avoid" 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">100</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">103</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">2.27</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2.52</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">1.32</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.33</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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
1.00
0.0132
P2Y3M7D
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 March 31,
2017 and December 31, 2016, 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="76%"></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; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>March 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2017</b></p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>December 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2016</b></p>
</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">0.47</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.60</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</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; PAGE-BREAK-INSIDE: avoid" 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">127</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">146</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">5.00</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5.25</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">1.91</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; PAGE-BREAK-INSIDE: avoid">
<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
-6500000
1.27
0.0191
P5Y
<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
March 31, 2017 and December 31, 2016 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="76%"></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; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>March 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2017</b></p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>December 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2016</b></p>
</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">0.47</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.60</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</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; PAGE-BREAK-INSIDE: avoid" 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">127</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">146</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">5.00</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5.25</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">1.91</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; PAGE-BREAK-INSIDE: avoid">
<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
-600000
1.27
0.0191
P5Y
<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 as of
March 31, 2017 and December 31, 2016 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="76%"></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; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>March 31</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2017</b></p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>December 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2016</b></p>
</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">0.47</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.60</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</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; PAGE-BREAK-INSIDE: avoid" 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">127</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">146</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">5.00</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5.25</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">1.91</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; PAGE-BREAK-INSIDE: avoid">
<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
1.27
0.0191
P5Y
<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 2013
Restructuring Warrants as of March 31, 2017 and
December 31, 2016, 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="76%"></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; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>March 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2017</b></p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>December 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2016</b></p>
</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">0.47</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.60</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</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; PAGE-BREAK-INSIDE: avoid" 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">100</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">103</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">2.27</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2.52</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">1.28</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.47</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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
1.00
0.0128
P2Y3M7D
1200000
<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 March 31, 2017 and December 31, 2016, 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="76%"></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; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>March 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2017</b></p>
</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>December 31,</b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2016</b></p>
</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">0.47</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.60</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion price</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</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; PAGE-BREAK-INSIDE: avoid" 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">100</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">103</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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">2.27</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2.52</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" 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">1.28</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1.47</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<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
-1400000
1.00
0.0128
P2Y3M7D
42373002
2022-03-31
50000000
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
P12M
2013-05-07
0.02
The Bridge Notes were amended and restated on May 7, 2013 and restated again on August 20, 2014 as described below.
Interest at 13% per year, compounded monthly and payable in the form of additional Bridge Notes.
2022-03-31
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
74569401
-2538000
1340000
-0.03
-709000
4000
-0.03
52000
122000
373000
2696000
880000
321000
3030000
-1829000
5000
-3000
-158000
-1829000
-312000
-17000
-2709000
86000
-472000
53000
-2538000
60687478
60687478
91000
1595000
95000
3449000
-3571000
2612000
6587250
25008082
1510682
37233561
4229826
-100000
-1600000
-100000
50000
800000
-100000
-800000
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