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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">On December 1, 2008, the Company and
CHA Bio & Diostech Co., Ltd. (“CHA”), formed an international joint venture. The new company, Stem Cell &
Regenerative Medicine International, Inc. (“SCRMI”), will work towards developing human blood cells and other clinical
therapies based on the Company’s hemangioblast program. Under the terms of the agreement, the Company purchased upfront
a 33% interest in the joint venture, and has received another 7% interest upon fulfilling certain obligations under the agreement
over a period of 3 years. The Company’s contribution includes (a) the uninterrupted use of a portion of its leased facility
at the Company’s expense, (b) the uninterrupted use of certain equipment in the leased facility, and (c) the release of
certain of the Company’s research and science personnel to be employed by the joint venture. In return, for a 60% interest,
CHA has agreed to contribute $150,000 cash and to fund all operational costs in order to conduct the hemangioblast program. Effective
May 1, 2010, the Company was no longer obligated to provide laboratory space to SCRMI. As of March 31, 2015, the Company holds
a 40% interest in the joint venture and CHA owns a 60% interest. The two partners to the joint venture are in negotiations on
further funding of the joint venture, but there can be no assurances that an agreement will be reached. Any financial statement
impact at this time is unclear should an agreement not be reached.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The Company has agreed to collaborate
with the joint venture in securing grants to further research and development of its technology. Additionally, SCRMI has paid
the Company a fee of $500,000 for an exclusive, worldwide license to the hemangioblast program. The Company recorded $7,353 and
$7,353 in license fee revenue for the three months ended March 31, 2015 and 2014, respectively, in its accompanying consolidated
statements of operations, and the balance of unamortized license fee of $314,951 and $322,304 is included in deferred revenue
in the accompanying consolidated balance sheets at March 31, 2015 and December 31, 2014, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">On July 15, 2011, the Company and
CHA entered into a binding term sheet, with the expectation of entering into a future definitive agreement, in which the joint
venture was realigned around both product development rights and research responsibilities. Under the terms of the binding term
sheet, SCRMI exclusively licensed the rights to the hemangioblast program to the Company for United States and Canada and expanded
the jurisdictional scope of the license to CHA to include Japan (in addition to South Korea, which was already exclusively licensed
to CHA). As part of the agreement, the scientists at SCRMI involved in the hemangioblast program were transferred to the Company,
and SCRMI discontinued its research activity and became solely a licensing entity. The Company fulfilled its obligation to meet
a minimal research spending requirement of $6.75 million by July 31, 2014 in order to maintain its exclusive license, up to the
point of filing an investigational new drug for a therapeutic product. Intellectual property rights created by the Company in
the course of its research are subject to a non-exclusive license to CHA for Japan and South Korea, and to SCRMI to be sub-licensable
under certain circumstances for countries other than the United States, Canada, Japan and South Korea. Pursuant to the agreement,
the Company paid $820,000 to SCRMI which is recorded as “losses attributable to equity method investments.” By filing
the investigational new animal drug application on September 12, 2013 with the Federal Drug Administration, the Company has met
the commitment required to maintain its exclusive license.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The accrued settlement is comprised
of the following at March 31, 2015 and December 31, 2014:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">March 31,</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">December 31,</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">2014</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td style="width: 66%"><font style="font-size: 8pt">SEC Civil Action</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">672,098</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">1,356,202</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">SEC Section 16 Investigation</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">375,000</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">375,000</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt">Total</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,047,098</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,731,202</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><u>Securities and Exchange Commission
– Civil Action</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">In May 2012, the Company was named
as a defendant in a civil action brought by the Securities and Exchange Commission (the “SEC”) related to transactions
involving the sale and issuance of the Company’s securities. The Securities and Exchange Commission alleges that Company
violated Section 5(a) and 5(c) of the Securities Act of 1933 (the “Securities Act”) because certain sales of shares
to outside organizations, completed in late 2008 and early 2009 under the Company’s former management, resulted in $3.5
million in proceeds to the Company, were neither registered under the Securities Act nor subject to an exemption from registration
under Section 3(a)(10) of the Securities Act, as amended. In addition, the Company is alleged to have violated Section 13(a) of
the Exchange Act of 1934 because the Company did not disclose the sale and issuance of the shares to the SEC on a timely basis.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">In December 2013, the Company settled
the civil action. Under the terms of the settlement accepted by the SEC, the Company consented to entry of judgment under which
it neither admits nor denies liability and agreed to the disgorgement of $3.5 million in proceeds from the transactions in question.
In addition, the Company will pay approximately $587,000 in pre-judgment interest. The total amount due, approximately $4.1 million,
will be paid over six equal quarterly installments. In addition, the settlement permanently restrains and enjoins the Company
from violations of Sections 5(a) and 5(c) of the Securities Act, Section 13(a) of the Exchange Act and Rule 13a-11 under the Exchange
Act.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><u>Securities and Exchange Commission
– Section 16 Investigation</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">In April 2013, it was determined that
Gary Rabin, the Company’s former Chief Executive Officer, failed to report 27 transactions in a timely manner on Form 4
under Section 16 of the Exchange Act in which Mr. Rabin sold shares of the Company’s common stock that took place between
February 7, 2011 and January 10, 2013. The SEC then investigated the unreported transactions involving sales of shares of the
Company’s common stock. In September 2014, the Company settled the SEC action arising from the SEC’s investigation.
Under the terms of the settlement accepted by the SEC, the Company consented to the entry of order under which it neither admits
nor denies liability and has agreed to pay a civil penalty of $375,000, which has been previously accrued for, by July 2015. In
addition, the settlement requires the Company to engage an independent Section 16 compliance consultant, provide Section 16(a)
training to each Section 16(a) reporting person, and provide a certification of compliance that each of the preceding requirements
were completed. The settlement also requires the Company to cease and desist from committing or causing any violations and any
future violations of Section 17(a)(2) of the Securities Act, Sections 13(a) and 14(a) of the Exchange Act, and Rules 12b-20, 13a-1,
and 14a-9 thereunder. The terms of this settlement require the Company to allocate financial and management resources to complying
with the settlement’s terms, which may have adverse effect on our business. Also, if the SEC deems the Company to not have
complied with any portion of the settlement, it may issue additional fines or sanctions against us which may limit our ability
to issue securities or otherwise conduct our business as currently conducted.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><i>CAMOFI Senior Secured Convertible
Debentures </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">On January 11, 2013, the Company entered
into a settlement agreement and mutual release (“the Settlement Agreement”) with CAMOFI Master LDC (“CAMOFI”)
and CAMHZN Master LDC (“CAMHZN” and together with CAMOFI, the “CAMOFI Parties”), relating to the lawsuit
between the CAMOFI Parties, as plaintiffs, and the Company, as defendant, in the Supreme Court of New York. Pursuant to the Settlement
Agreement the Company issued Debentures in the principal amount of $4,732,781 and $1,267,219 to CAMOFI and CAMHZN, respectively
(together the “Debentures”).</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The Company received conversion notices
during the three months ended March 31, 2014 for $2,400,000. The Company issued 433,736 shares of its common stock for these conversion
notices. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The Debentures had contained an embedded
beneficial conversion feature as the Debentures are convertible at a price per share of common stock equal to 80% of VWAP of the
ten consecutive trading days prior to the conversion date. The embedded beneficial conversion feature was modeled using a binomial
lattice model, and had a calculated value at March 31, 2014 of $287,000. The Company recorded a gain of $376,000 for the change
in the fair value of the embedded conversion option liability for the three months ended March 31, 2014.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The Company recorded a debt discount
of $725,000, which was to be amortized over the life of the Debentures using the effective interest rate of 22.9%. For the three
months ended March 31, 2014, the Company amortized $154,648 of the debt discount and recorded it as interest expense. The unamortized
discount at March 31, 2014 was $108,229. The Company recorded interest expense of $51,440 for the three months ended March 31,
2014 based on the contractual interest rate. The unamortized discount balance of $108,229 was written off to interest expense
with the retirement of the remaining outstanding Debentures.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> <b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">On May 2, 2014, the Company paid to
the CAMOFI Parties an aggregate amount of approximately $1,616,000 calculated in accordance with the payment acceleration provisions
of the Debentures and satisfying the Company’s obligations under the Debentures. The payment represented the remaining $1,200,000
in principal amount due and an additional amount of approximately $416,000, which represented penalties, interest and legal cost
reimbursement to the CAMOFI Parties. With the payment, the Company satisfied in full its obligations under the Debentures and
the terms of the Settlement Agreement and Mutual Release dated as of December 31, 2012 pursuant to which the Debentures were issued
in January 2013. The Company received correspondence from the CAMOFI Parties stating that the CAMOFI Parties believe the aggregate
amount due to be different than the amount the Company paid. The Company believes that their interpretation of the Debentures
is accurate and complete and its liability under the Debentures remains at zero as of March 31, 2015. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Warrant Activity</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">A summary of warrant activity for
the three months ended March 31, 2015 is presented below:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Weighted</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Weighted</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Average</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Aggregate</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Average</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Remaining</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Intrinsic</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Number of</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Exercise</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Contractual</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Value</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 1%; border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="width: 34%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Warrants</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Price $</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Life (in years)</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">(000)$</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Outstanding, December 31, 2014</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">45,906</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">40.46</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">1.45</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Granted </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Exercised </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Forfeited/Canceled</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Outstanding, March 31, 2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">45,906</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">40.46</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1.21</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Exercisable, March 31, 2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">45,906</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">40.46</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1.21</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The aggregate intrinsic value in the
table above is before applicable income taxes and is calculated based on the difference between the exercise price of the warrants
and the quoted price of the Company’s common stock as of the reporting date.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">On September 19, 2012 the Company
entered into a purchase agreement with Lincoln Park Capital, LLC (“Lincoln Park”). Pursuant to the purchase agreement,
the Company had the right to sell to Lincoln Park up to $35,000,000 in shares of its common stock. On June 18, 2014, the Company
completed the last sale of common stock to Lincoln Park under this agreement.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">On June 27, 2014, the Company entered
into a similar purchase agreement, the “2014 Purchase Agreement,” with Lincoln Park pursuant to which the Company
has the right to sell to Lincoln Park up to $30,000,000 in shares of its common stock, subject to certain limitations set forth
in the purchase agreement.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">During the three months ended March
31, 2015, Lincoln Park purchased 972,699 shares of common stock pursuant to the 2014 Purchase Agreement for cash proceeds of $6,120,702.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">During the three months ended March
31, 2015, the Company issued various board members 7,500 shares of common stock valued at $46,200 as compensation for board services.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">On August 28, 2014, the Company completed
a 100-to-1 reverse stock split of its common stock. Unless otherwise noted, all references in these financial statements to number
of shares, price per share and weighted average number of shares outstanding of common stock have been adjusted to reflect the
reverse stock split on a retroactive basis. The split was also applied to any outstanding equity-based awards. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">At the annual meeting of the Company’s
stockholders held in November 2014, the Company’s stockholders approved a Certificate of Amendment to the Company’s
Certificate of Incorporation. The Certificate of Amendment provided for an increase in the number of authorized shares of the
Company’s common stock, par value $0.001 per share, from 37,500,000 to 60,000,000. The Certificate of Amendment became effective
upon its filing with the Secretary of State of the State of Delaware on November 12, 2014.</font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">March 31,</font></td><td><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">December 31,</font></td><td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2015</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2014</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 66%; text-align: left"><font style="font-size: 8pt">Machinery & equipment</font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">1,206,666</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">1,186,232</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-size: 8pt">Computer equipment</font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">104,857</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">104,857</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: left"><font style="font-size: 8pt">Office furniture</font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">54,226</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">54,226</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt"><font style="font-size: 8pt">Leasehold improvements</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">620,252</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">620,252</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">1,986,001</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">1,965,567</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: left; padding-bottom: 1pt"><font style="font-size: 8pt">Accumulated depreciation</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">(1,197,748</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">)</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">(1,132,604</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt"><font style="font-size: 8pt">Property and equipment, net</font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">788,253</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">832,963</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">March 31,</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">December 31,</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">2014</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td style="width: 66%"><font style="font-size: 8pt">SEC Civil Action</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">672,098</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">1,356,202</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">SEC Section 16 Investigation</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">375,000</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">375,000</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt">Total</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,047,098</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,731,202</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Weighted</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Weighted</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Average</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Aggregate</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Average</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Remaining</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Intrinsic</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Number of</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Exercise</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Contractual</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Value</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 1%; border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="width: 34%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Warrants</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Price $</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Life (in years)</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">(000)$</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Outstanding, December 31, 2014</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">45,906</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">40.46</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">1.45</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Granted </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Exercised </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Forfeited/Canceled</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Outstanding, March 31, 2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">45,906</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">40.46</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1.21</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Exercisable, March 31, 2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">45,906</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">40.46</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1.21</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Options/Shares</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Options/Shares</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Options</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Available</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Total</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Stock Plan</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Issued</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Outstanding</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">For Grant</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Authorized</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 36%"><font style="font-size: 8pt">2005 Stock Incentive Plan</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="text-align: right; width: 13%"><font style="font-size: 8pt">2,756,356</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="text-align: right; width: 13%"><font style="font-size: 8pt">2,132,893</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="text-align: right; width: 13%"><font style="font-size: 8pt">3,217,495</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="text-align: right; width: 13%"><font style="font-size: 8pt">5,818,388</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt">2014 Stock Option and Incentive Plan</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">173,000</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">138,000</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">77,000</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">250,000</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,929,356</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,270,893</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">3,294,495</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">6,068,388</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
Lesser of lease life or economic life
587000
4100000
0
0
0
10000
40.46
40.46
6.62
0
7500
46200
8
46192
63000
173000
2756356
2929356
1.48
1.12
1.29
1.12
0.0209
.0192
0.0172
.0159
7.28
7.19
493000
503000
0
0
10252
10252
0
0
10252
10252
16255
10252
-6003
6003
10252
4325886
3728776
1587115
2819799
P4Y
P3Y
P4Y
77000
3217495
3294495
250000
5818388
6068388
37488
0
12.03
11.72
21.27
0
6.31
P7Y11M8D
P8Y1M13D
P7Y10M6D
P6Y10M2D
45906
40.46
P1Y2M16D
P1Y5M12D
P2Y7M6D
P5Y
P5Y
P6Y3M
P6Y3M
Expected volatility of the Company's common stock
65%
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><u>Lincoln Park</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">On various dates from April 1, 2015
through May 7, 2015, Lincoln Park purchased 280,892 shares of common stock for cash proceeds to the Company of $1,904,816. As
of May 7, 2015, the Company has $10,593,933 available through the Lincoln Park financing arrangement.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">A summary of stock plans as of March
31, 2015 is presented below:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Stock Plans</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Options/Shares</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Options/Shares</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Options</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Available</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Total</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Stock Plan</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Issued</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Outstanding</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">For Grant</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Authorized</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 36%"><font style="font-size: 8pt">2005 Stock Incentive Plan</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="text-align: right; width: 13%"><font style="font-size: 8pt">2,756,356</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="text-align: right; width: 13%"><font style="font-size: 8pt">2,132,893</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="text-align: right; width: 13%"><font style="font-size: 8pt">3,217,495</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="text-align: right; width: 13%"><font style="font-size: 8pt">5,818,388</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt">2014 Stock Option and Incentive Plan</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">173,000</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">138,000</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">77,000</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">250,000</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,929,356</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,270,893</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">3,294,495</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">6,068,388</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Stock Option Activity</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">A summary of option activity for the
three months ended March 31, 2015 is presented below:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Weighted</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Weighted</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Average</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Average</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Remaining</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Aggregate</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Number of</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Exercise</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Contractual</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Intrinsic</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Options</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Price</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Life (in years)</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Value</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td style="width: 36%"><font style="font-size: 8pt">Outstanding, December 31, 2014</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">2,245,381</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">12.03</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">8.12</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">12,110</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Granted</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">63,000</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">6.31</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt">Exercised</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Forfeited/canceled</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(37,488</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">21.27</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt">Outstanding, March 31, 2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,270,893</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> $</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">11.72</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">7.94</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> $</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">13,408</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt">Vested and expected to vest</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 10pt"><font style="font-size: 8pt">at March 31, 2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,140,783</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">11.97</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">7.85</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">13,028</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Exercisable, March 31, 2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,270,049</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">14.94</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">6.84</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">10,483</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The aggregate intrinsic value in the
table above is before applicable income taxes and is calculated based on the difference between the exercise price of the options
and the quoted price of the Company’s common stock as of the reporting date.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The assumptions used in calculating
the fair value of options granted using the Black-Scholes option pricing model for options granted during the three months ended,
are as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="width: 52%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 25%; text-align: center"><font style="font-size: 8pt">March 31,</font></td>
<td nowrap="nowrap" style="width: 1%; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 21%; text-align: center"><font style="font-size: 8pt">March 31,</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">2015</font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">2014</font></td></tr>
<tr style="background-color: #EEEEEE">
<td nowrap="nowrap" style="vertical-align: top"><font style="font-size: 8pt">Risk-free interest rate </font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">1.59 – 1.92%</font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">1.72 – 2.09%</font></td></tr>
<tr style="background-color: white">
<td nowrap="nowrap" style="vertical-align: top"><font style="font-size: 8pt">Expected life of the options </font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">5.00 - 6.25 years</font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">5.00 - 6.25 years</font></td></tr>
<tr style="background-color: #EEEEEE">
<td nowrap="nowrap" style="vertical-align: top"><font style="font-size: 8pt">Expected volatility </font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">112 - 129%</font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">112 - 148%</font></td></tr>
<tr style="background-color: white">
<td nowrap="nowrap" style="vertical-align: top"><font style="font-size: 8pt">Expected dividend yield </font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">0%</font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">0%</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">The weighted
average grant-date fair value for the options granted during the three months ended March 31, 2015 and 2014 was $5.50 and $8.00,
respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">The unrecognized
compensation expense related to the unvested options as of March 31, 2015, was $7,080,676 which will be recognized over the weighted
average vesting period of 2.30 years.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Restricted Stock Unit Activity</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"><b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">A summary of the restricted stock
unit activity for the three months ended March 31, 2015:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Number of<br /> Shares<br />
Underlying Restricted <br /> Units</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Weighted<br /> Average<br />
Grant-Date <br /> Fair Value <br /> per Share</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Weighted <br /> Average<br />
Remaining<br /> Recognition<br /> Period<br /> (in years)</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 49%"><font style="font-size: 8pt">Outstanding, December 31, 2014</font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">493,000</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">7.28</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">2.60</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt"><font style="font-size: 8pt">Granted</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">10,000</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">6.62</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt">Outstanding, March 31, 2015</font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">503,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">7.19</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">2.42</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt"><font style="font-size: 8pt">Unearned
stock-based compensation expense of outstanding restricted units</font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">2,933,395</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">Stock compensation
expense to employees and non-employees for the three months ended March 31, 2015 and 2014 are as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">March 31,</font></td><td><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">March 31,</font></td><td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2015</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2014</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 66%"><font style="font-size: 8pt">R&D</font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">554,720</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">85,185</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt"><font style="font-size: 8pt">G&A</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">964,434</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">261,410</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">1,519,154</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">346,595</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
3196969
Ocata Therapeutics, Inc.
0001140098
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--12-31
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b>Organization and Nature of Business</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">Ocata Therapeutics, Inc., and Subsidiary
(the “Company”) is a clinical stage biotechnology company focused on the development and commercialization of Regenerative
Ophthalmology<sup>TM</sup> therapeutics. The most advanced products are in clinical trials for the treatment of Stargardt’s
macular degeneration, dry age-related macular degeneration, and myopic macular degeneration. The Company is also developing several
pre-clinical terminally differentiated-cell therapies for the treatment of other ocular disorders. Additionally, the Company has
a number of pre-clinical stage assets in disease areas outside the field of ophthalmology, including autoimmune, inflammatory
and wound healing-related disorders. The Company’s intellectual property portfolio includes pluripotent human embryonic
stem cell, or hESC; induced pluripotent stem cell, or iPSC, platforms; and other cell therapy technologies. The Company has no
therapeutic products currently available for sale and does not expect to have any therapeutic products commercially available
for sale for a period of years, if at all. These factors indicate that the Company’s ability to continue research and development
activities is dependent upon the ability of management to obtain additional financing as required.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The Company pursues a number of approaches
to generating transplantable tissues both in-house and through collaborations with other researchers who have particular interests
in, and skills related to, cellular differentiation. The Company’s research in this area includes projects focusing on the
development of many different cell types that may be used to treat a range of diseases within ophthalmology and other therapeutic
areas. Control of cellular differentiation and the culture and growth of stem and differentiated cells are important areas of
research and development for the Company. Based on the success to date of the Phase 1 clinical trials and what the Company sees
as favorable market dynamics of the ophthalmology sector, the Company has shifted its strategic priorities to focus primarily
on the development, and ultimate commercialization of ophthalmology therapies. The largest indication involving macular degeneration
is “age-related macular degeneration”, or AMD. AMD is the leading cause of blindness and visual impairment in adults
over fifty years of age. The Company is also pursuing a treatment for Stargardt’s Maculuar Degeneration, or SMD, an inherited
juvenile onset form of macular degeneration. The Company plans to initiate the Phase 2 clinical trial for dry AMD in the second
quarter of this year.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Basis of Presentation</i></b>
— The Company follows accounting standards set by the Financial Accounting Standards Board (“FASB”). The accompanying
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America, GAAP. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification,™
sometimes referred to as the Codification or “ASC.” Although the Company believes that the disclosures in these financial
statements are adequate to make the information presented not misleading, certain information normally included in the footnotes
prepared in accordance with GAAP has been omitted as permitted by the rules and regulations of the Securities and Exchange Commission
(“SEC”).  The accompanying financial statements should be read in conjunction with the audited financial statements
and notes thereto included in the Company’s Annual Report on Form 10−K for the fiscal year ended December 31, 2014
filed with the SEC on March 16, 2015.  The results for the three month period ended March 31, 2015 are not necessarily indicative
of the results that may be expected for the fiscal year ending December 31, 2015, or any future period.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The accompanying consolidated financial
statements have been prepared in conformity with GAAP which contemplate continuation of the Company as a going concern. However,
as of March 31, 2015, the Company has an accumulated deficit of $356.2 million, recurring losses from operations, and negative
working capital which raise substantial doubt about the ability of the Company to continue as a going concern. The ability to
continue as a going concern is dependent upon many factors, including the Company’s ability to raise additional capital
in a timely manner. The Company has no expectation of generating any meaningful revenues from our product candidates for a substantial
period of time and must rely on raising funds in capital transactions to finance our research and development programs. Our future
cash requirements will depend on many factors, including the pace and scope of our research and development programs, the
costs involved in filing, prosecuting and enforcing patents, and other costs associated with commercializing our potential products.
Accordingly, management’s plans to continue as a going concern contemplate raising additional capital including the prior
execution of an agreement for a $30 million equity line in late June 2014, of which approximately $12.5 million remains available
as of March 31, 2015. There can be no assurances that management can raise the necessary additional capital on favorable terms
or at all. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable
to continue as a going concern.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"></font> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">On August 28, 2014, the Company effected
a 100-to-1 reverse stock split of its common stock. Unless otherwise noted, all references in these financial statements to number
of shares, price per share and weighted average number of shares outstanding of common stock have been adjusted to reflect the
reverse stock split on a retroactive basis. The split was also applied to any outstanding equity-based awards.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Principles of Consolidation
</i></b>— The accounts of the Company and its wholly-owned subsidiary Mytogen, Inc. are included in the accompanying
consolidated financial statements. All intercompany balances and transactions were eliminated in consolidation.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Segment Reporting </i></b>—
ASC 280, <i>Segment Reporting</i> requires use of the “management approach” model for segment reporting. The management
approach model is based on the way a company’s management organizes segments within the company for making operating decisions
and assessing performance. The Company determined it has one operating segment.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Use of Estimates</i></b> —
These consolidated financial statements have been prepared in accordance with GAAP and, accordingly, require management to make
estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Specifically, the Company’s management has estimated
loss contingencies related to outstanding litigation. In addition, management has estimated variables used to calculate the Black-Scholes
option pricing model used to value derivative instruments and the Company estimates the fair value of the embedded conversion
option associated with the senior secured convertible debentures using a binomial lattice model as discussed below under “Fair
Value Measurements.” Also, management has estimated the expected economic life and value of the Company’s licensed
technology, the Company’s net operating loss for tax purposes, share-based payments for compensation to employees, directors,
consultants and investment banks, and the useful lives of the Company’s fixed assets. Actual results could differ from those
estimates.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Reclassifications</i></b> —
Certain prior period financial statement balances have been reclassified to conform to the current period presentation. Items
include the presentation of net loss applicable to common stock and net loss applicable to common share on the face of the statement
of operations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">On August 28, 2014, the Company effected
a 100-to-1 reverse stock split of its common stock. As such, the Company determined that current year presentation of net loss
applicable to common stock and net loss applicable to common share was appropriate. The Company retroactively adjusted the presentation
for net loss applicable to common stock and net loss applicable to common share for prior periods on the statement of operations
to conform to the current year’s presentation.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Cash and Cash Equivalents</i></b>
— Cash equivalents are comprised of certain highly liquid investments with maturities of three months or less when purchased.
The Company maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. The Company has
not experienced any losses related to this concentration of risk. As of March 31, 2015 and December 31, 2014, the Company had
deposits in excess of federally-insured limits totaling $3,728,776 and $4,325,886, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Commitments and Contingencies
</i></b>— The Company is subject to various claims and contingencies related to lawsuits as well as commitments under contractual
and other obligations. The Company recognizes liabilities for contingencies and commitments when a loss is probable and can be
reasonably estimated.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">Relating to loss contingencies the
Company accrues the best estimate of a loss within a range. If no estimate in a range is better than any other, the minimum amount
is accrued. The Company discloses a reasonably possible loss in excess of the amount accrued, if applicable. For reasonably possible
loss contingencies, the Company discloses the nature of the loss contingency and provides a range of the estimate of possible
loss or state that an estimate cannot be made.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The other liabilities balance as of
March 31, 2015 and December 31, 2014 is made up of payable liabilities primarily related to the acquisition of Mytogen which the
Company does not expect to settle within the coming year.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Grants Receivable</i></b> —
The Company periodically assesses its grants receivable for collectability on a specific identification basis. If collectability
of an account becomes unlikely, the Company records an allowance for that doubtful account. Once the Company has exhausted efforts
to collect, management writes off the grants receivable against the allowance it has already created.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Property and Equipment</i></b>
— The Company records its property and equipment at historical cost. The Company expenses maintenance and repairs as incurred.
Upon disposition of property and equipment, the gross cost and accumulated depreciation are written off and the difference between
the proceeds and the net book value is recorded as a gain or loss on sale of assets. In the case of certain assets acquired under
capital leases, the assets are recorded net of imputed interest, based upon the net present value of future payments. Assets under
capital lease are pledged as collateral for the related lease.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The Company provides for depreciation
over the assets’ estimated useful lives as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="width: 30%"><font style="font-size: 8pt">Machinery & equipment</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 69%"><font style="font-size: 8pt">4 years</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Computer equipment</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">3 years</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Office furniture</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">4 years</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Leasehold improvements</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Lesser of lease life or economic life</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Patents</i></b> — The
Company follows ASC 350-30, <i>General Intangibles Other than Goodwill </i>(“ASC 350-30”), in accounting for its patents.
ASC 350-30 provides that costs of internally developing, maintaining, or restoring intangible assets that are not specifically
identifiable, that have indeterminate lives, or that are inherent in a continuing business and related to an entity as a whole,
shall be recognized as an expense when incurred. The Company has expensed as research and development expense all costs associated
with developing its patents.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Equity Method Investment</i></b>
— The Company follows ASC 323, <i>Investments-Equity Method and Joint Ventures, </i>in accounting for its investment in
the joint venture. In the event the Company’s share of the joint venture’s net losses reduces the Company’s
investment to zero, the Company will discontinue applying the equity method and will not provide for additional losses unless
the Company has guaranteed obligations of the joint venture or is otherwise committed to provide further financial support for
the joint venture. If the joint venture subsequently reports net income, the Company will resume applying the equity method only
after its share of that net income equals the share of net losses not recognized during the period the equity method was suspended.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Long-Lived Assets</i></b>—
The Company follows ASC 360-10, <i>Property, Plant, and Equipment, </i>which established a “primary asset” approach
to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for
a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset
is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition
of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Through March 31, 2015, the Company had not experienced impairment losses on its long-lived assets.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"></font> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Fair Value Measurements</i>
—</b> The Company applies the provisions of ASC 820-10, <i>Fair Value Measurements and Disclosures </i>(“ASC 820-10”)<i>.
</i>ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement
that enhances disclosure requirements for fair value measures. For certain financial instruments, including cash and cash equivalents,
grants receivable, prepaid expenses, accounts payable and accrued expenses, the carrying amounts approximate fair value due to
their relatively short maturities. The carrying amount of senior secured convertible debentures approximated fair value as the
interest rate charged on the debentures was based on the prevailing rate. The three levels of valuation hierarchy are defined
as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 6%"><font style="font-size: 8pt"> </font></td>
<td style="width: 2%"><font style="font: 8pt Symbol">·</font></td>
<td style="width: 92%"><font style="font-size: 8pt">Level 1 inputs to the valuation methodology are quoted prices for identical
assets or liabilities in active markets.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 6%"><font style="font-size: 8pt"> </font></td>
<td style="width: 2%"><font style="font: 8pt Symbol">·</font></td>
<td style="width: 92%"><font style="font-size: 8pt">Level 2 inputs to the valuation methodology include quoted prices for
similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly
or indirectly, for substantially the full term of the financial instrument.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 6%"><font style="font-size: 8pt"> </font></td>
<td style="width: 2%"><font style="font: 8pt Symbol">·</font></td>
<td style="width: 92%"><font style="font-size: 8pt">Level 3 inputs to the valuation methodology are unobservable and significant
to the fair value measurement.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The Company analyzes all financial
instruments with features of both liabilities and equity under ASC 480, <i>Distinguishing Liabilities From Equity, </i>and ASC
815, <i>Derivatives and Hedging.</i> Derivative liabilities are adjusted to reflect fair value at each period end, with any increase
or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects
of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial
instruments. In addition, the fair values of freestanding derivative instruments such as warrant derivatives are valued using
the Black-Scholes model.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The Company uses Level 3 inputs for
its valuation methodology for the fair value of certain embedded conversion options and other warrant derivative liabilities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The Company estimated the fair value
of the embedded conversion option associated with its 8% convertible debentures using a binomial lattice, which estimated and
compared the present value of the principal and interest payments to the as converted value to determine whether the holder of
the notes should convert the notes into the Company’s common stock or continue to receive principal and interest payments.
The Company used this methodology to determine the beneficial conversion features because there were no observable inputs available
with respect to the fair value.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The binomial lattice relied on the
following Level 3 inputs: (1) expected volatility of the Company’s common stock; (2) potential discount for illiquidity
of large blocks of the Company’s common stock, and (3) discount rate for contractual debt principal and interest payments.
The fair value of the embedded beneficial conversion feature was estimated as the difference between the fair value of the notes
with and without the conversion feature. The fair value of the notes without the conversion feature was determined using one Level
3 input, the discount rate for contractual debt interest and principal payments.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 72px"><font style="font-size: 8pt"> </font></td>
<td style="width: 24px"><font style="font: 8pt Symbol">·</font></td>
<td><font style="font-size: 8pt">The expected volatility of the Company’s common stock is estimated from the historical
volatility of daily returns in the Company’s common stock price. The Company monitors the volatility of its common stock
on a quarterly basis to observe trends that may impact the fair value of the notes.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 72px"><font style="font-size: 8pt"> </font></td>
<td style="width: 24px"><font style="font: 8pt Symbol">·</font></td>
<td><font style="font-size: 8pt">The discount for illiquidity is measured using an average-strike option that calculates the
discount as the opportunity cost for not being able to sell a large block of the Company’s common stock immediately
at prevailing observable market prices. Inputs to the average-strike option model include the expected volatility of the Company’s
common stock and time to sell a large block of the Company’s stock as Level 3 inputs and other observable inputs. The
time to sell the stock is estimated considering the historical daily trading volume of our common stock and market maker estimates
of the amount of shares that can be offered for sale above the daily trading volume without depressing the price
of the Company’s common stock.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">At March 31, 2015, the Company identified
the following assets and liabilities that are required to be presented on the balance sheet at fair value:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Description</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Fair Value <br />
As of<br />
March 31, 2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="10" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Fair Value Measurements
at<br />
March 31, 2015<br />
Using Fair Value Hierarchy</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 1</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 2</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 3</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td style="width: 39%"><font style="font-size: 8pt">Warrant liabilities</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; width: 1%"><font style="font-size: 8pt">$ </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; width: 11%"><font style="font-size: 8pt">10,252</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; width: 11%"><font style="font-size: 8pt">–</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; width: 11%"><font style="font-size: 8pt">–</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; width: 11%"><font style="font-size: 8pt">10,252</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Total</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">10,252</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">10,252</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The following tables reconcile the
change in fair value for measurements categorized within Level 3 of the fair value hierarchy:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt">  </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Warrant Liabilities</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td style="width: 84%"><font style="font-size: 8pt">Balance at December 31, 2014</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">16,255</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 8pt">Total gains for the period included in earnings</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(6,003)</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt">Balance at March 31, 2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">10,252</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">Gains and losses included in earnings
for the three months ended March 31, 2015 are reported as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt">  </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: -10pt"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Warrant<br />
Derivative <br />
Liabilities</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td style="width: 84%"><font style="font-size: 8pt">Total gain included in earnings</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; width: 13%"><font style="font-size: 8pt">6,003</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The following table provides quantitative
information about measurements categorized within Level 3 of the fair value hierarchy:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt">  </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="width: 33%; text-indent: -10pt"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 11%; text-align: center"><font style="font-size: 8pt">Fair Value at</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 11%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 30%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 11%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="background-color: white; text-align: center; text-indent: -10pt"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt">March 31,</font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt">Valuation</font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center; text-indent: -10pt"><font style="font-size: 8pt">Description</font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">2015</font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Technique</font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Unobservable Input</font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Value</font></td></tr>
<tr style="background-color: #EEEEEE">
<td style="vertical-align: top"><font style="font-size: 8pt">Warrant liabilities</font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td style="vertical-align: top; text-align: center"><font style="font-size: 8pt">$10,252 </font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td style="vertical-align: bottom"><font style="font-size: 8pt">Black Scholes Model</font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td style="vertical-align: top"><font style="font-size: 8pt">Expected volatility of the Company's common stock</font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td style="vertical-align: top; text-align: right"><font style="font-size: 8pt">65%</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">For the three months ended March 31,
2015 and March 31, 2014 the Company recognized gains of $6,003 and $287,028, respectively, for the changes in the valuation of
derivative liabilities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The Company did not identify any non-recurring
assets and liabilities that were recorded at fair value during the periods presented.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Revenue Recognition</i></b>
<b><i>and Deferred Revenue</i> —</b> The Company’s revenues are primarily generated from license and research agreements
with collaborators. Licensing revenue is recognized on a straight-line basis over the shorter of the life of the license or the
estimated economic life of the patents related to the license.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">License fee revenue begins to be recognized
in the first full month following the effective date of the license agreement. Deferred revenue represents the portion of the
license and other payments received that has not been earned. Costs associated with license revenue are deferred and recognized
over the same term as the revenue. Reimbursements of research expense pursuant to grants are recorded in the period during which
collection of the reimbursement becomes assured, because the reimbursements are subject to approval.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">In some cases, the Company is entitled
to receive royalty payments from licensees. In such cases, the Company recognizes the royalties when they are earned and collectability
of those royalty payments is reasonably assured.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">In connection with its license agreements,
the Company recorded $39,468 and $39,468 in license fee revenue for the three months ended March 31, 2015 and 2014, respectively,
in its consolidated statements of operations, and the remainder of the license fees are included in deferred revenue at March
31, 2015 and December 31, 2014, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Research and Development Costs
</i></b>— Costs incurred in connection with research and development activities are expensed as incurred. Research and development
expenses consist of (i) employee-related expenses, including salaries, benefits, travel and stock compensation expense; (ii) external
research and development expenses incurred under arrangements with third parties, such as contract research organizations, investigational
sites and consultants; (iii) the cost of acquiring, developing and manufacturing clinical study materials; (iv) facilities
and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and laboratory and other
supplies; and (v) costs associated with pre-clinical and clinical activities and regulatory operations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The Company enters into consulting,
research and other agreements with commercial firms, researchers, universities and others for the provision of goods and services.
Under such agreements, the Company may pay for services on a monthly, quarterly, project or other basis. Such arrangements are
generally cancellable upon reasonable notice and payment of costs incurred. Costs are considered incurred based on an evaluation
of the progress to completion of specific tasks under each contract using information and data provided to us by the Company’s
clinical sites and vendors. These costs consist of direct and indirect costs associated with specific projects, as well as fees
paid to various entities that perform certain research on behalf of the Company. Reimbursements of research expense pursuant to
grants are recorded in the period during which collection of the reimbursement becomes assured, because the reimbursements are
subject to approval.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">In certain circumstances, the Company
is required to make advance payments to vendors for goods or services that will be received in the future for use in research
and development activities. In such circumstances, the advance payments are deferred and are expensed when the activity has been
performed or when the goods have been received.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Stock Compensation</i></b> —
The Company records stock compensation in accordance with ASC 718, <i>Compensation – Stock Compensation </i>(“ASC
718”). ASC 718 requires companies to measure compensation cost for stock employee compensation at fair value at the measurement
date (generally the grant date) and recognize the expense over the employee’s requisite service period. The Company recognizes
in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees
and non-employees.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Income Taxes</i></b> —
Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carryforwards, and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, based on the weight of available evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted
for the effects of the changes in tax laws and rates at the date of enactment.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">When tax returns are filed, it is
highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject
to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit
of a tax position is recognized in the financial statements in the period during which, based on the weight of available evidence,
management believes it is more likely than not that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions
that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent
likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax
positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits
in the balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">Applicable interest and penalties
associated with unrecognized tax benefits are classified as additional income taxes in the statements of operations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Net Loss Per Share</i></b> —
Basic net loss per share applicable to common stockholders is calculated by dividing net loss applicable to common stockholders
by the weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net
loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents
outstanding for the period, determined using the treasury-stock method and the if-converted method. For purposes of the diluted
net loss per share calculation, convertible preferred stock, stock options, unvested restricted stock, and warrants are considered
to be common stock equivalents but have been excluded from the calculation of diluted net loss per share, as their effect would
be anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share was the same for all periods presented.
Additionally, dividends associated with the preferred stock, all of which has been extinguished as of March 31, 2015, has been
added back in order to calculate the net loss applicable to common stockholders.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">At March 31, 2015 and 2014, approximately
2,819,799 and 1,587,115 potentially dilutive shares, respectively, were excluded from the shares used to calculate diluted earnings
per share as their inclusion would be anti-dilutive.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Recent Accounting Pronouncements
</i></b>— In April 2015, the Financial Accounting Standards Board (FASB) issued ASU No. 2015-03, Interest – Imputation
of Interest (Subtopic 835-30) –<i>Simplifying the Presentation of Debt Issuance Costs</i>. The new standard requires that
debt issuance costs be presented in the balance sheet as a direct deduction from the debt liability, consistent with the presentation
of a debt discount. The new standard will be effective for the Company on January 1, 2016. The new standard is not likely to have
any impact on the Company’s financial statements or related disclosures. </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accounts of the Company and its wholly-owned
subsidiary Mytogen, Inc. are included in the accompanying consolidated financial statements. All intercompany balances and
transactions were eliminated in consolidation.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">ASC 280, <i>Segment Reporting</i> requires
use of the “management approach” model for segment reporting. The management approach model is based on the way a
company’s management organizes segments within the company for making operating decisions and assessing performance. The
Company determined it has one operating segment.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">These consolidated financial statements have
been prepared in accordance with GAAP and, accordingly, require management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Specifically, the Company’s management has estimated loss contingencies related to outstanding litigation.
In addition, management has estimated variables used to calculate the Black-Scholes option pricing model used to value derivative
instruments and the Company estimates the fair value of the embedded conversion option associated with the senior secured convertible
debentures using a binomial lattice model as discussed below under “Fair Value Measurements”. Also, management has
estimated the expected economic life and value of the Company’s licensed technology, the Company’s net operating loss
for tax purposes, share-based payments for compensation to employees, directors, consultants and investment banks, and the useful
lives of the Company’s fixed assets. Actual results could differ from those estimates.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company follows ASC 323, <i>Investments-Equity
Method and Joint Ventures, </i>in accounting for its investment in the joint venture. In the event the Company’s share of
the joint venture’s net losses reduces the Company’s investment to zero, the Company will discontinue applying the
equity method and will not provide for additional losses unless the Company has guaranteed obligations of the joint venture or
is otherwise committed to provide further financial support for the joint venture. If the joint venture subsequently reports net
income, the Company will resume applying the equity method only after its share of that net income equals the share of net losses
not recognized during the period the equity method was suspended.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Costs incurred in connection with research and
development activities are expensed as incurred. Research and development expenses consist of (i) employee-related expenses,
including salaries, benefits, travel and stock compensation expense; (ii) external research and development expenses incurred
under arrangements with third parties, such as contract research organizations, investigational sites and consultants; (iii) the
cost of acquiring, developing and manufacturing clinical study materials; (iv) facilities and other expenses, which include
direct and allocated expenses for rent and maintenance of facilities and laboratory and other supplies; and (v) costs associated
with pre-clinical and clinical activities and regulatory operations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company enters into consulting, research
and other agreements with commercial firms, researchers, universities and others for the provision of goods and services. Under
such agreements, the Company may pay for services on a monthly, quarterly, project or other basis. Such arrangements are generally
cancellable upon reasonable notice and payment of costs incurred. Costs are considered incurred based on an evaluation of the progress
to completion of specific tasks under each contract using information and data provided to us by the Company’s clinical sites
and vendors. These costs consist of direct and indirect costs associated with specific projects, as well as fees paid to various
entities that perform certain research on behalf of the Company. Reimbursements of research expense pursuant to grants are recorded
in the period during which collection of the reimbursement becomes assured, because the reimbursements are subject to approval.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In certain circumstances, the Company is required
to make advance payments to vendors for goods or services that will be received in the future for use in research and development
activities. In such circumstances, the advance payments are deferred and are expensed when the activity has been performed or when
the goods have been received.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred income taxes are provided using the
liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit
carryforwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance
when, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates at
the date of enactment.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">When tax returns are filed, it is highly certain
that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty
about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position
is recognized in the financial statements in the period during which, based on the weight of available evidence, management believes
it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation
processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not
recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized
upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds
the amount measured as described above is reflected as a liability for unrecognized tax benefits in the balance sheets along with
any associated interest and penalties that would be payable to the taxing authorities upon examination.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Applicable interest and penalties associated
with unrecognized tax benefits are classified as additional income taxes in the statements of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Basis of Presentation</i></b>
— The Company follows accounting standards set by the Financial Accounting Standards Board (“FASB”). The accompanying
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America, GAAP. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification,™
sometimes referred to as the Codification or “ASC.” Although the Company believes that the disclosures in these financial
statements are adequate to make the information presented not misleading, certain information normally included in the footnotes
prepared in accordance with GAAP has been omitted as permitted by the rules and regulations of the Securities and Exchange Commission
(“SEC”).  The accompanying financial statements should be read in conjunction with the audited financial statements
and notes thereto included in the Company’s Annual Report on Form 10−K for the fiscal year ended December 31, 2014
filed with the SEC on March 16, 2015.  The results for the three month period ended March 31, 2015 are not necessarily indicative
of the results that may be expected for the fiscal year ending December 31, 2015, or any future period.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The accompanying consolidated financial
statements have been prepared in conformity with GAAP which contemplate continuation of the Company as a going concern. However,
as of March 31, 2015, the Company has an accumulated deficit of $356.2 million, recurring losses from operations, and negative
working capital which raise substantial doubt about the ability of the Company to continue as a going concern. The ability to
continue as a going concern is dependent upon many factors, including the Company’s ability to raise additional capital
in a timely manner. The Company has no expectation of generating any meaningful revenues from our product candidates for a substantial
period of time and must rely on raising funds in capital transactions to finance our research and development programs. Our future
cash requirements will depend on many factors, including the pace and scope of our research and development programs, the
costs involved in filing, prosecuting and enforcing patents, and other costs associated with commercializing our potential products.
Accordingly, management’s plans to continue as a going concern contemplate raising additional capital including the prior
execution of an agreement for a $30 million equity line in late June 2014, of which approximately $12.5 million remains available
as of March 31, 2015. There can be no assurances that management can raise the necessary additional capital on favorable terms
or at all. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable
to continue as a going concern.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"></font> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">On August 28, 2014, the Company effected
a 100-to-1 reverse stock split of its common stock. Unless otherwise noted, all references in these financial statements to number
of shares, price per share and weighted average number of shares outstanding of common stock have been adjusted to reflect the
reverse stock split on a retroactive basis. The split was also applied to any outstanding equity-based awards.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Reclassifications</i></b> —
Certain prior period financial statement balances have been reclassified to conform to the current period presentation. Items
include the presentation of net loss applicable to common stock and net loss applicable to common share on the face of the statement
of operations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">On August 28, 2014, the Company effected
a 100-to-1 reverse stock split of its common stock. As such, the Company determined that current year presentation of net loss
applicable to common stock and net loss applicable to common share was appropriate. The Company retroactively adjusted the presentation
for net loss applicable to common stock and net loss applicable to common share for prior periods on the statement of operations
to conform to the current year’s presentation.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Cash and Cash Equivalents</i></b>
— Cash equivalents are comprised of certain highly liquid investments with maturities of three months or less when purchased.
The Company maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. The Company has
not experienced any losses related to this concentration of risk. As of March 31, 2015 and December 31, 2014, the Company had
deposits in excess of federally-insured limits totaling $3,728,776 and $4,325,886, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Commitments and Contingencies
</i></b>— The Company is subject to various claims and contingencies related to lawsuits as well as commitments under contractual
and other obligations. The Company recognizes liabilities for contingencies and commitments when a loss is probable and can be
reasonably estimated.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"></font> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">Relating to loss contingencies the
Company accrues the best estimate of a loss within a range. If no estimate in a range is better than any other, the minimum amount
is accrued. The Company discloses a reasonably possible loss in excess of the amount accrued, if applicable. For reasonably possible
loss contingencies, the Company discloses the nature of the loss contingency and provides a range of the estimate of possible
loss or state that an estimate cannot be made.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The other liabilities balance as of
March 31, 2015 and December 31, 2014 is made up of payable liabilities primarily related to the acquisition of Mytogen which the
Company does not expect to settle within the coming year.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Grants Receivable</i></b> —
The Company periodically assesses its grants receivable for collectability on a specific identification basis. If collectability
of an account becomes unlikely, the Company records an allowance for that doubtful account. Once the Company has exhausted efforts
to collect, management writes off the grants receivable against the allowance it has already created.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Property and Equipment</i></b>
— The Company records its property and equipment at historical cost. The Company expenses maintenance and repairs as incurred.
Upon disposition of property and equipment, the gross cost and accumulated depreciation are written off and the difference between
the proceeds and the net book value is recorded as a gain or loss on sale of assets. In the case of certain assets acquired under
capital leases, the assets are recorded net of imputed interest, based upon the net present value of future payments. Assets under
capital lease are pledged as collateral for the related lease.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The Company provides for depreciation
over the assets’ estimated useful lives as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="width: 30%"><font style="font-size: 8pt">Machinery & equipment</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 69%"><font style="font-size: 8pt">4 years</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Computer equipment</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">3 years</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Office furniture</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">4 years</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Leasehold improvements</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Lesser of lease life or economic life</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="width: 30%"><font style="font-size: 8pt">Machinery & equipment</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 69%"><font style="font-size: 8pt">4 years</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Computer equipment</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">3 years</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Office furniture</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">4 years</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Leasehold improvements</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Lesser of lease life or economic life</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Patents</i></b> — The
Company follows ASC 350-30, <i>General Intangibles Other than Goodwill </i>(“ASC 350-30”), in accounting for its patents.
ASC 350-30 provides that costs of internally developing, maintaining, or restoring intangible assets that are not specifically
identifiable, that have indeterminate lives, or that are inherent in a continuing business and related to an entity as a whole,
shall be recognized as an expense when incurred. The Company has expensed as research and development expense all costs associated
with developing its patents.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Long-Lived Assets</i></b>—
The Company follows ASC 360-10, <i>Property, Plant, and Equipment, </i>which established a “primary asset” approach
to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for
a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset
is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition
of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Through March 31, 2015, the Company had not experienced impairment losses on its long-lived assets.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"><b><i>Fair Value Measurements</i>
—</b> The Company applies the provisions of ASC 820-10, <i>Fair Value Measurements and Disclosures </i>(“ASC 820-10”)<i>.
</i>ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement
that enhances disclosure requirements for fair value measures. For certain financial instruments, including cash and cash equivalents,
grants receivable, prepaid expenses, accounts payable and accrued expenses, the carrying amounts approximate fair value due to
their relatively short maturities. The carrying amount of senior secured convertible debentures approximated fair value as the
interest rate charged on the debentures was based on the prevailing rate. The three levels of valuation hierarchy are defined
as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 6%"><font style="font-size: 8pt"> </font></td>
<td style="width: 2%"><font style="font: 8pt Symbol">·</font></td>
<td style="width: 92%"><font style="font-size: 8pt">Level 1 inputs to the valuation methodology are quoted prices for identical
assets or liabilities in active markets.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 6%"><font style="font-size: 8pt"> </font></td>
<td style="width: 2%"><font style="font: 8pt Symbol">·</font></td>
<td style="width: 92%"><font style="font-size: 8pt">Level 2 inputs to the valuation methodology include quoted prices for
similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly
or indirectly, for substantially the full term of the financial instrument.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 6%"><font style="font-size: 8pt"> </font></td>
<td style="width: 2%"><font style="font: 8pt Symbol">·</font></td>
<td style="width: 92%"><font style="font-size: 8pt">Level 3 inputs to the valuation methodology are unobservable and significant
to the fair value measurement.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The Company analyzes all financial
instruments with features of both liabilities and equity under ASC 480, <i>Distinguishing Liabilities From Equity, </i>and ASC
815, <i>Derivatives and Hedging.</i> Derivative liabilities are adjusted to reflect fair value at each period end, with any increase
or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects
of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial
instruments. In addition, the fair values of freestanding derivative instruments such as warrant derivatives are valued using
the Black-Scholes model.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The Company uses Level 3 inputs for
its valuation methodology for the fair value of certain embedded conversion options and other warrant derivative liabilities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The Company estimated the fair value
of the embedded conversion option associated with its 8% convertible debentures using a binomial lattice, which estimated and
compared the present value of the principal and interest payments to the as converted value to determine whether the holder of
the notes should convert the notes into the Company’s common stock or continue to receive principal and interest payments.
The Company used this methodology to determine the beneficial conversion features because there were no observable inputs available
with respect to the fair value.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The binomial lattice relied on the
following Level 3 inputs: (1) expected volatility of the Company’s common stock; (2) potential discount for illiquidity
of large blocks of the Company’s common stock, and (3) discount rate for contractual debt principal and interest payments.
The fair value of the embedded beneficial conversion feature was estimated as the difference between the fair value of the notes
with and without the conversion feature. The fair value of the notes without the conversion feature was determined using one Level
3 input, the discount rate for contractual debt interest and principal payments.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 72px"><font style="font-size: 8pt"> </font></td>
<td style="width: 24px"><font style="font: 8pt Symbol">·</font></td>
<td><font style="font-size: 8pt">The expected volatility of the Company’s common stock is estimated from the historical
volatility of daily returns in the Company’s common stock price. The Company monitors the volatility of its common stock
on a quarterly basis to observe trends that may impact the fair value of the notes.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 72px"><font style="font-size: 8pt"> </font></td>
<td style="width: 24px"><font style="font: 8pt Symbol">·</font></td>
<td><font style="font-size: 8pt">The discount for illiquidity is measured using an average-strike option that calculates the
discount as the opportunity cost for not being able to sell a large block of the Company’s common stock immediately
at prevailing observable market prices. Inputs to the average-strike option model include the expected volatility of the Company’s
common stock and time to sell a large block of the Company’s stock as Level 3 inputs and other observable inputs. The
time to sell the stock is estimated considering the historical daily trading volume of our common stock and market maker estimates
of the amount of shares that can be offered for sale above the daily trading volume without depressing the price
of the Company’s common stock.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"></font> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">At March 31, 2015, the Company identified
the following assets and liabilities that are required to be presented on the balance sheet at fair value:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Description</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Fair Value <br />
As of<br />
March 31, 2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="10" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Fair Value Measurements
at<br />
March 31, 2015<br />
Using Fair Value Hierarchy</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 1</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 2</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 3</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td style="width: 39%"><font style="font-size: 8pt">Warrant liabilities</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; width: 1%"><font style="font-size: 8pt">$ </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; width: 11%"><font style="font-size: 8pt">10,252</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; width: 11%"><font style="font-size: 8pt">–</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; width: 11%"><font style="font-size: 8pt">–</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; width: 11%"><font style="font-size: 8pt">10,252</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Total</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">10,252</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">10,252</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The following tables reconcile the
change in fair value for measurements categorized within Level 3 of the fair value hierarchy:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt">  </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Warrant Liabilities</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td style="width: 84%"><font style="font-size: 8pt">Balance at December 31, 2014</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">16,255</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 8pt">Total gains for the period included in earnings</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(6,003)</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt">Balance at March 31, 2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">10,252</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">Gains and losses included in earnings
for the three months ended March 31, 2015 are reported as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt">  </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: -10pt"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Warrant<br />
Derivative <br />
Liabilities</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td style="width: 84%"><font style="font-size: 8pt">Total gain included in earnings</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; width: 13%"><font style="font-size: 8pt">6,003</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The following table provides quantitative
information about measurements categorized within Level 3 of the fair value hierarchy:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt">  </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="width: 33%; text-indent: -10pt"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 11%; text-align: center"><font style="font-size: 8pt">Fair Value at</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 11%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 30%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 11%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="background-color: white; text-align: center; text-indent: -10pt"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt">March 31,</font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt">Valuation</font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center; text-indent: -10pt"><font style="font-size: 8pt">Description</font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">2015</font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Technique</font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Unobservable Input</font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Value</font></td></tr>
<tr style="background-color: #EEEEEE">
<td style="vertical-align: top"><font style="font-size: 8pt">Warrant liabilities</font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td style="vertical-align: top; text-align: center"><font style="font-size: 8pt">$10,252 </font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td style="vertical-align: bottom"><font style="font-size: 8pt">Black Scholes Model</font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td style="vertical-align: top"><font style="font-size: 8pt">Expected volatility of the Company's common stock</font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td style="vertical-align: top; text-align: right"><font style="font-size: 8pt">65%</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">For the three months ended March 31,
2015 and March 31, 2014 the Company recognized gains of $6,003 and $287,028, respectively, for the changes in the valuation of
derivative liabilities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The Company did not identify any non-recurring
assets and liabilities that were recorded at fair value during the periods presented.</font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Warrant Liabilities</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td style="width: 84%"><font style="font-size: 8pt">Balance at December 31, 2014</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">16,255</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 8pt">Total gains for the period included in earnings</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(6,003)</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt">Balance at March 31, 2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">10,252</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="width: 33%; text-indent: -10pt"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 11%; text-align: center"><font style="font-size: 8pt">Fair Value at</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 11%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 30%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 11%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="background-color: white; text-align: center; text-indent: -10pt"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt">March 31,</font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt">Valuation</font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="background-color: white; text-align: center"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center; text-indent: -10pt"><font style="font-size: 8pt">Description</font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">2015</font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Technique</font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Unobservable Input</font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Value</font></td></tr>
<tr style="background-color: #EEEEEE">
<td style="vertical-align: top"><font style="font-size: 8pt">Warrant liabilities</font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td style="vertical-align: top; text-align: center"><font style="font-size: 8pt">$10,252 </font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td style="vertical-align: bottom"><font style="font-size: 8pt">Black Scholes Model</font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td style="vertical-align: top"><font style="font-size: 8pt">Expected volatility of the Company's common stock</font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td style="vertical-align: top; text-align: right"><font style="font-size: 8pt">65%</font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Description</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Fair Value <br />
As of<br />
March 31, 2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="10" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Fair Value Measurements
at<br />
March 31, 2015<br />
Using Fair Value Hierarchy</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 1</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 2</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 3</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td style="width: 39%"><font style="font-size: 8pt">Warrant liabilities</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; width: 1%"><font style="font-size: 8pt">$ </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; width: 11%"><font style="font-size: 8pt">10,252</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; width: 11%"><font style="font-size: 8pt">–</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; width: 11%"><font style="font-size: 8pt">–</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; width: 11%"><font style="font-size: 8pt">10,252</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Total</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">10,252</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">10,252</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">Property and
equipment consisted of the following at March 31, 2015 and December 31, 2014:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">March 31,</font></td><td><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">December 31,</font></td><td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2015</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2014</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 66%; text-align: left"><font style="font-size: 8pt">Machinery & equipment</font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">1,206,666</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">1,186,232</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-size: 8pt">Computer equipment</font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">104,857</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">104,857</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: left"><font style="font-size: 8pt">Office furniture</font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">54,226</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">54,226</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt"><font style="font-size: 8pt">Leasehold improvements</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">620,252</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">620,252</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">1,986,001</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">1,965,567</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: left; padding-bottom: 1pt"><font style="font-size: 8pt">Accumulated depreciation</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">(1,197,748</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">)</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">(1,132,604</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt"><font style="font-size: 8pt">Property and equipment, net</font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">788,253</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">832,963</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">Depreciation
expense for the three months ended March 31, 2015 and 2014 amounted to $65,144 and $30,960, respectively.</font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Weighted</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Weighted</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Average</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Average</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Remaining</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Aggregate</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Number of</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Exercise</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Contractual</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Intrinsic</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Options</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Price</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Life (in years)</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Value</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td style="width: 36%"><font style="font-size: 8pt">Outstanding, December 31, 2014</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">2,245,381</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">12.03</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">8.12</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">12,110</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Granted</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">63,000</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">6.31</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt">Exercised</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">–</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Forfeited/canceled</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(37,488</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">21.27</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt">Outstanding, March 31, 2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,270,893</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> $</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">11.72</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">7.94</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> $</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">13,408</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt">Vested and expected to vest</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 10pt"><font style="font-size: 8pt">at March 31, 2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,140,783</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">11.97</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">7.85</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">13,028</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #EEEEEE">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Exercisable, March 31, 2015</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,270,049</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">14.94</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">6.84</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">10,483</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="width: 52%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 25%; text-align: center"><font style="font-size: 8pt">March 31,</font></td>
<td nowrap="nowrap" style="width: 1%; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="width: 21%; text-align: center"><font style="font-size: 8pt">March 31,</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">2015</font></td>
<td nowrap="nowrap" style="text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">2014</font></td></tr>
<tr style="background-color: #EEEEEE">
<td nowrap="nowrap" style="vertical-align: top"><font style="font-size: 8pt">Risk-free interest rate </font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">1.59 – 1.92%</font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">1.72 – 2.09%</font></td></tr>
<tr style="background-color: white">
<td nowrap="nowrap" style="vertical-align: top"><font style="font-size: 8pt">Expected life of the options </font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">5.00 - 6.25 years</font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">5.00 - 6.25 years</font></td></tr>
<tr style="background-color: #EEEEEE">
<td nowrap="nowrap" style="vertical-align: top"><font style="font-size: 8pt">Expected volatility </font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">112 - 129%</font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">112 - 148%</font></td></tr>
<tr style="background-color: white">
<td nowrap="nowrap" style="vertical-align: top"><font style="font-size: 8pt">Expected dividend yield </font></td>
<td nowrap="nowrap" style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">0%</font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt"> </font></td>
<td nowrap="nowrap" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">0%</font></td></tr>
</table>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Number of<br /> Shares<br />
Underlying Restricted <br /> Units</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Weighted<br /> Average<br />
Grant-Date <br /> Fair Value <br /> per Share</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Weighted <br /> Average<br />
Remaining<br /> Recognition<br /> Period<br /> (in years)</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 49%"><font style="font-size: 8pt">Outstanding, December 31, 2014</font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">493,000</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">7.28</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">2.60</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt"><font style="font-size: 8pt">Granted</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">10,000</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">6.62</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt">Outstanding, March 31, 2015</font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">503,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">7.19</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">2.42</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt"><font style="font-size: 8pt">Unearned
stock-based compensation expense of outstanding restricted units</font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">2,933,395</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">March 31,</font></td><td><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">March 31,</font></td><td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2015</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2014</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 66%"><font style="font-size: 8pt">R&D</font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">554,720</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">85,185</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt"><font style="font-size: 8pt">G&A</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">964,434</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">261,410</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">1,519,154</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">346,595</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
Black Scholes Model
30000000
12500000
On August 28, 2014, the Company effected a 100-to-1 rreverse stock split of its common stock.
7353
7353
314951
322304
.40
433736
2400000
287000
376000
108229
51440
108229
1616000
P1Y2M16D
0
7500
2140783
1270049
11.97
14.94
12110
13408
13028
10483
0.00
0.00
8.00
5.50
7080676
P2Y3M18D