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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">As of September
30, 2014 and December 31, 2013, intangible assets related to this acquisition are summarized as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2014</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2013</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Estimated</b></font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Accumulated</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Life</b></font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Cost</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Amortization</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Net</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Net</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-right: 5.05pt; padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Contract related intangible asset:</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 38%; padding-right: 5.05pt; padding-left: 0.25in; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Cato Research discounted contract</font></td>
<td style="width: 9%; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3 years</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">355,000</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">355,000</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 14%; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-right: 5.05pt; padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Technology related intangible assets:</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-right: 5.05pt; padding-left: 0.25in; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Patents for the AzoneTS-based product candidates and formulation</font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4 years</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,305,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,305,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,305,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-right: 5.05pt; padding-left: 0.25in; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Drug Master Files containing formulation, clinical and safety documentation used by the FDA</font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4 years</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,500,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,500,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,500,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-right: 5.05pt; padding-left: 0.25in; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">In-process pharmaceutical products for 2 indications</font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4 years</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">6,820,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">6,820,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">6,820,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-right: 5.05pt; padding-left: 45pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Total technology related intangible assets</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">9,625,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">9,625,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">9,625,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-right: 5.05pt; text-indent: 0.75in; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Total, net</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">9,980,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">355,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">9,625,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">9,625,000</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="margin: 0">Intangible assets related to technology are expected to be amortized on a straight-line basis over</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Future
minimum lease payments for each of the next five years under the current terms of these operating leases at September 30,
2014 are approximately as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Franklin</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Philadelphia</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Total</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Year Ending December 31,</font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 64%; text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2014</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">113,000</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">31,333</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">144,333</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2015</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">457,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">457,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2016</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">468,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">468,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2017</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">389,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">389,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2018</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Total</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,427,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">31,333</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,458,333</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Estimated amortization
expense for each of the next five calendar years is as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p></td>
<td style="line-height: 107%"> </td>
<td colspan="2">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Estimated</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Amortization</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 4.1pt"><b>Expense</b></p></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 82%; text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">2014</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 15%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">2015</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">2016</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,480,800</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">2017</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2,961,600</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">2018</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2,961,600</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The table below
presents the changes in the Derivative Warrant Liability, which is measured at fair value on a recurring basis and classified as
Level 3 in fair value hierarchy:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2014</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2013</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%; padding-right: 2.15pt; padding-left: 9pt; text-indent: 9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Derivative Warrant Liability as of January 1</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,119,155</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5,585,141</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-right: 2.15pt; padding-left: 9pt; text-indent: 27pt; line-height: 107%; font-size: 11pt"><font style="font: 10pt Times New Roman, Times, Serif">Total unrealized losses included in net loss </font><font style="font: 7pt Times New Roman, Times, Serif">(1)</font><font style="font: 10pt Times New Roman, Times, Serif">	</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif; background-color: white">176,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,061<font style="background-color: white">,682</font></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-right: 2.15pt; padding-left: 9pt; text-indent: 27pt; line-height: 107%; font-size: 11pt"><font style="font: 10pt Times New Roman, Times, Serif">Total unrealized gains included in net loss </font><font style="font: 7pt Times New Roman, Times, Serif">(1)</font><font style="font: 10pt Times New Roman, Times, Serif">	</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(1,182,000</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(5,515,000</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-right: 2.15pt; padding-left: 9pt; text-indent: 27pt; line-height: 107%; font-size: 11pt"><font style="font: 10pt Times New Roman, Times, Serif">Total realized gains included in net loss </font><font style="font: 7pt Times New Roman, Times, Serif">(1)</font><font style="font: 10pt Times New Roman, Times, Serif">	</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif; background-color: white">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif; background-color: white">(152,668</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-right: 2.15pt; padding-left: 9pt; text-indent: 9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Derivative Warrant Liability as of September 30</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">113,155</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">979,155</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td colspan="8" style="line-height: 107%; font-size: 11pt"><font style="font: 7pt Times New Roman, Times, Serif">(1)</font><font style="font: 10pt Times New Roman, Times, Serif">	Included in Gain on Revaluation of Derivative Warrant Liability in the Consolidated Statement of Operations.</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in">A summary of non-vested restricted stock
activity as of and for the nine months ended September 30, 2014 is as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Restricted Stock</b></font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Shares</b></p></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Weighted-</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Average</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Grant-Date</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Fair Value</b></p></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%; text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Non-vested shares at January 1, 2014</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">201,655</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">10.66</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.25in; text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">36,936</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3.00</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.25in; text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Vested</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(66,333</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">7.15</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.25in; text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Forfeited</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(47,223</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">7.41</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Non-vested shares at September 30, 2014</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">125,035</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">11.48</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In February 2014,
Patrick T. Mooney, M.D., our former President and Chief Executive Officer, and his wife, Elizabeth Mooney, filed a complaint against
the Company and certain of its Directors and Officers in the Court of Common Pleas in Philadelphia County.  The complaint,
which alleges (i) that Dr. Mooney’s termination was without cause so that he is entitled to certain severance benefits under
his employment agreement and associated statutory remedies; (ii) that certain legally required disclosures by the Company and its
General Counsel defamed Dr. Mooney; and (iii) that Dr. Mooney’s wife is entitled to damages under a theory of loss of consortium,
seeks in excess of $20 million in damages.  The Company denied the allegations of the complaint and asserted counterclaims
against Dr. Mooney based upon the same conduct which provided the cause for his termination.  Thereafter, the Company
withdrew three of the counterclaims after concluding that Dr. Mooney’s personal financial condition was unlikely to permit
recovery of the advanced defense costs he had demanded or such damages as the Company might ultimately recover and that the expenditure
of cash necessary to prosecute those affirmative claims was best conserved for other corporate purposes.  The Company
believes it has strong defenses to the claims asserted and intends to defend them vigorously.  The Company similarly
believes that it has strong support for its remaining counterclaim.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In July 2014, Dr.
and Mrs. Mooney filed another complaint in the Court of Common Pleas in Philadelphia County against the Company, certain of its
directors and Officers and a former Director and officer alleging (i) wrongful use of civil proceedings and (ii) abuse of process
in the original filing of the counterclaims withdrawn in the earlier action.  Mrs. Mooney also asserted another claim
for loss of consortium.  This complaint seeks in excess of $30 million in damages.  The Company has denied
the allegations.  The Company believes that this action is without merit, that it acted lawfully and in good faith, and
that it has strong defenses to the claims asserted.  Accordingly, the Company intends to vigorously defend against this
lawsuit.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In August 2014,
Dr. Mooney filed a complaint in Delaware Chancery Court against the Company for advancement of defense costs related to his February
2014 complaint, many of which the Company had paid to date and the remainder of which were subject to a good faith dispute that
counsel for the Company and Dr. Mooney had been attempting to amicably resolve.  Dr. Mooney also demanded that the Company
pay for his attorneys fees related to his July 2014 complaint against the Company, amongst other matters.  The Company
filed a Motion to Dismiss this complaint and is awaiting the Court’s ruling.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In September 2014, Platinum Partners Value Arbitrage
Fund L.P. (“Platinum Partners”) filed a complaint in Delaware Chancery Court against the Company seeking inspection
of certain of the Company’s books and records. The Company responded to the complaint on October 7, 2014. On November 17, 2014, the Company and Platinum Partners filed a Joint Stipulation of Dismissal, and this matter
is now concluded.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In October 2014, Platinum
filed a complaint in Delaware Chancery Court against the Company seeking inspection of the Company's stocklist and certain
of the Company’s books and records. The Company responded to the complaint on October 24, 2014. On November 10, 2014, the
Company and Platinum Partners filed a Joint Stipulation of Dismissal, and this matter is now concluded.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On October 31, 2014, Platinum
Partners filed a complaint in Delaware Chancery Court against the Company and three of its directors seeking, among other things,
a declaration that certain of the Company's bylaws are invalid and that the three directors breached their fiduciary duties and
an order requiring the Company to hold a special meeting at which the stockholders can vote on whether to remove the three directors.
The Company believes that Platinum Partners' request for relief is without merit and intends to contest the suit vigorously.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In 2009, the Company entered
into a License Agreement with Handok Pharmaceuticals Co., Ltd. (“Handok”) pursuant to which the Company granted Handok
a license to develop, use, market, sell and import Symphony for continuous glucose monitoring for use by medical facilities and/or
individual consumers in South Korea (the “Handok License”). The Handok License has a minimum term of 10 years from
the date of the first commercial sale of Symphony in South Korea.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The Company received a
licensing fee of approximately $500,000 upon execution of the Handok License and the right to receive future milestone payments
and royalties. The Company recognizes these upfront, nonrefundable payments as revenue on a straight-line basis over the contractual
or estimated performance period. During the three months ended September 30, 2014 and 2013, the Company recorded approximately
$19,000 and $23,000, respectively, of nonrefundable license revenue. During the nine months ended September 30, 2014 and 2013,
the Company recorded approximately $57,000 and $68,000, respectively, of nonrefundable license revenue. As of September 30, 2014,
approximately $76,000 is recognizable over the next 12 months and is shown as current deferred revenue. The remaining $19,000 is
recognizable as revenue beyond the 12 month period and is classified as non-current.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In December 2013, in connection
with a capital raising transaction, the Company entered into a license, development and commercialization agreement with MTIA (the
“License Agreement”). Later in December 2013, January 2014 and March 2014, the License Agreement with MTIA was amended
to extend the due date to March 27, 2014 for receipt of all proceeds past the original closing date of December 12, 2013. The amendment
provides that the Company is not required to commence its obligations under the License Agreement, including the transfer of any
technology or other documents, products or information to MTIA, until the Company has received the full proceeds from the capital
raising transaction. To date, the Company has received from MTIA $2,400,000 of the previously anticipated $5,000,000 in proceeds
in accordance with the capital raising transaction (see Note 8). Since MTIA did not fulfill its obligations with respect to the
capital raising transaction, the Company has not transferred any information to MTIA relating to the license, development or commercialization
of our product in accordance with the License Agreement.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="background-color: yellow"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">For restricted stock issued
and outstanding during the nine month period ended September 30, 2014 and 2013, the Company incurred non-cash compensation expense
of approximately $349,000 and $355,000, respectively, each net of estimated forfeitures.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">During the nine months
ended September 30, 2014, the Company granted an aggregate of 36,936 restricted shares of Common Stock to certain Officers, employees,
Directors and consultants of the Company. The grants were issued pursuant to the 2008 Plan. The grant date fair value of these
restricted stock grants was approximately $111,000.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.25in">A summary of non-vested restricted
stock activity as of and for the nine months ended September 30, 2014 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">  </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Restricted Stock</b></font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Shares</b></p></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Weighted-</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Average</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Grant-Date</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Fair Value</b></p></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%; text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Non-vested shares at January 1, 2014</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">201,655</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">10.66</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.25in; text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">36,936</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3.00</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.25in; text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Vested</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(66,333</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">7.15</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.25in; text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Forfeited</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(47,223</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">7.41</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Non-vested shares at September 30, 2014</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">125,035</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">11.48</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Among the 125,035
shares of non-vested restricted stock, the various vesting criteria include the following:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt/normal Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 45pt">·</td><td>51,685 shares of restricted stock vest upon the FDA approval of Symphony or the sale of the Company; and</td></tr></table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt/normal Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 45pt">·</td><td>73,350 shares of restricted stock vest over four years, at each of the anniversary dates of the grants.</td></tr></table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">As of September
30, 2014, there was approximately $296,000 of total unrecognized compensation expense related to non-vested share-based restricted
stock arrangements granted pursuant to the Company’s equity compensation plans that vest over time in the foreseeable future.  As
of September 30, 2014, the Company cannot estimate the timing of completion of performance vesting requirements required by certain
of these restricted stock grant arrangements.  Compensation expense related to these restricted share grants will be
recognized when the Company concludes that achievement of the performance vesting conditions is probable.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In March 2003, the Company’s
stockholders approved its 2003 Stock Option and Incentive Plan (the “2003 Plan”). Pursuant to the 2003 Plan, the Company’s
Board of Directors (or its committees and/or executive Officers delegated by the Board of Directors) may grant incentive and nonqualified
Stock Options, restricted stock, and other stock-based awards to the Company’s employees, Officers, Directors, consultants
and advisors. As of September 30, 2014, there were 10,000 restricted shares of Common Stock issued and options to purchase an aggregate
of 39,000 shares of Common Stock outstanding under the 2003 Plan and no shares are available for future grants due to the 2003
Plan’s expiration.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In May 2008, the Company’s
stockholders approved the 2008 Equity Compensation Plan, as amended (the “2008 Plan”). The 2008 Plan provides for grants
of incentive Stock Options to employees and nonqualified Stock Options and restricted stock to employees, consultants and non-employee
Directors of the Company. The maximum number of shares available under the 2008 Plan is 10,000,000 shares. As of September 30,
2014, there were 108,550 restricted shares of Common Stock issued and Stock Options to purchase 644,154 shares of Common Stock
outstanding under the 2008 Plan and 9,234,296 shares available for future grants.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">For the nine months ended
September 30, 2014, no Stock Option grants were issued outside of an equity compensation plan.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in">The following table shows the remaining
shares available for future grants for each plan and outstanding shares:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Equity Compensation Plans</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Not Pursuant to a Plan</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2003 Plan</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2008 Plan</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="3" style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1pt solid; text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Shares Available For Issuance</b></font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="3" style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 9pt; text-align: justify; line-height: 107%; text-indent: -9pt"><font style="font: 10pt Times New Roman, Times, Serif">Total reserved for stock options and restricted stock</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">160,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">10,000,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="3" style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.25in; text-align: justify; line-height: 107%; text-indent: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">Net restricted stock issued net of cancellations</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(10,000</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(108,550</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td colspan="3" style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.25in; text-align: justify; line-height: 107%; text-indent: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">Stock options granted</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(154,449</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(1,700,883</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td colspan="3" style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.25in; text-align: justify; line-height: 107%; text-indent: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">Add back options cancelled before exercise</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">79,849</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,043,729</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="3" style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.25in; text-align: justify; line-height: 107%; text-indent: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">Less shares no longer available due to Plan expiration</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(75,400</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="3" style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt; text-align: justify; line-height: 107%; text-indent: -9pt"><font style="font: 10pt Times New Roman, Times, Serif">Remaining shares available for future grants at September 30, 2014</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">9,234,296</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="3" style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td colspan="9" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; width: 63%; text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Stock options granted</font></td>
<td style="vertical-align: bottom; width: 1%; line-height: 107%"> </td>
<td style="vertical-align: bottom; width: 1%; line-height: 107%"> </td>
<td style="vertical-align: bottom; width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">154,449</font></td>
<td style="vertical-align: bottom; width: 1%; line-height: 107%"> </td>
<td style="vertical-align: bottom; width: 1%; line-height: 107%"> </td>
<td style="vertical-align: bottom; width: 1%; line-height: 107%"> </td>
<td style="vertical-align: bottom; width: 9%; text-align: right; line-height: 107%"><font style="font-family: Times New Roman, Times, Serif">1,700,883</font></td>
<td style="vertical-align: bottom; width: 1%; line-height: 107%"> </td>
<td style="vertical-align: bottom; width: 1%; line-height: 107%"> </td>
<td style="vertical-align: bottom; width: 1%; line-height: 107%"> </td>
<td style="vertical-align: bottom; width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">310,000</font></td>
<td style="vertical-align: bottom; width: 1%; line-height: 107%"> </td>
<td style="vertical-align: top; width: 1%; line-height: 107%"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom; text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Less:Stock options cancelled</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(79,849</font></td>
<td style="vertical-align: bottom; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(1,043,729</font></td>
<td style="vertical-align: bottom; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(188,333</font></td>
<td style="vertical-align: bottom; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="vertical-align: top; line-height: 107%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; text-align: justify; line-height: 107%; text-indent: 27pt"><font style="font: 10pt Times New Roman, Times, Serif">Stock options exercised</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(35,600</font></td>
<td style="vertical-align: bottom; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(13,000</font></td>
<td style="vertical-align: bottom; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(66,667</font></td>
<td style="vertical-align: bottom; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="vertical-align: top; line-height: 107%"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom; text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Net options outstanding before restricted stock</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">39,000</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">644,154</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">55,000</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: top; line-height: 107%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Net restricted stock issued net of cancellations</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">10,000</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">108,550</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">6,485</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: top; line-height: 107%"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom; text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding options and restricted shares at September 30, 2014</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">49,000</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">752,704</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">61,485</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="vertical-align: top; line-height: 107%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The Company is
authorized to issue up to 40,000,000 shares of preferred stock with such rights, preferences and privileges as are determined by
the Board of Directors.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b><i> </i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Series C Convertible Preferred
Stock</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The Company has
authorized 10,000 shares of Series C Preferred Stock, of which 1,000 shares were issued and outstanding as of September 30, 2014
and December 31, 2013.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Series D Convertible Preferred
Stock</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The Company has
authorized 3,600,000 shares of Series D Convertible Preferred Stock, of which 1,000,000 shares were issued and outstanding as of
September 30, 2014 and December 31, 2013.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Series E Convertible Preferred
Stock</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="margin: 0">The Company has authorized 1,748,613 shares of Series E Convertible Preferred Stock, all of which were issued
and outstanding as of September 30, 2014 and December 31, 2013.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Derivative financial instruments
are recognized as a liability on the Consolidated Balance Sheet and measured at fair value. On September 30, 2014 and December
31, 2013, the Company had outstanding warrants to purchase 1,211,485 and 1,209,211 shares of its Common Stock, respectively. Included
in these outstanding warrants at September 30, 2014 and December 31, 2013 are warrants to purchase 700,000 shares, which are considered
to be derivative financial instruments. The fair value of these derivative instruments on September 30, 2014 and December 31, 2013
were approximately $113,000 and $1,119,000, respectively, and is included in Derivative Warrant Liability, a current liability
in the Consolidated Balance Sheet. Changes in fair value of the derivative financial instruments are recognized in the Consolidated
Statement of Operations as a gain or loss on revaluation of Derivative Warrant Liability. The Gain (Loss) on Revaluation of Derivative
Warrant Liability for the three months ended September 30, 2014 and 2013 were approximately $473,000 and $(70,000), respectively,
and for the nine months ended September 30, 2014 and 2013 were approximately $1,006,000 and $4,606,000, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.2in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The primary underlying
risk exposure pertaining to the warrants is the change in fair value of the underlying common stock for each reporting period.
For<font style="letter-spacing: 0.75pt"> </font>the<font style="letter-spacing: 0.75pt"> </font>three<font style="letter-spacing: 0.75pt">
</font><font style="letter-spacing: -0.1pt">m</font>onths<font style="letter-spacing: 0.75pt"> </font>ended<font style="letter-spacing: 0.75pt">
September 30</font>,<font style="letter-spacing: 0.75pt"> </font>2014 and 2013,<font style="letter-spacing: 0.75pt"> </font>no<font style="letter-spacing: 0.75pt">
</font>Derivative<font style="letter-spacing: 0.7pt"> </font>Warrants<font style="letter-spacing: 0.7pt"> </font>were<font style="letter-spacing: 0.7pt">
</font>exercised<font style="letter-spacing: 0.7pt"> </font>a<font style="letter-spacing: -0.1pt">n</font>d<font style="letter-spacing: 0.7pt">
</font>none<font style="letter-spacing: 0.7pt"> </font>expired.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The table below presents
the changes in the Derivative Warrant Liability, which is measured at fair value on a recurring basis and classified as Level 3
in fair value hierarchy:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2014</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2013</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%; padding-right: 2.15pt; padding-left: 9pt; text-indent: 9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Derivative Warrant Liability as of January 1</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,119,155</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5,585,141</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-right: 2.15pt; padding-left: 9pt; text-indent: 27pt; line-height: 107%; font-size: 11pt"><font style="font: 10pt Times New Roman, Times, Serif">Total unrealized losses included in net loss </font><font style="font: 7pt Times New Roman, Times, Serif">(1)</font><font style="font: 10pt Times New Roman, Times, Serif">	</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif; background-color: white">176,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,061<font style="background-color: white">,682</font></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-right: 2.15pt; padding-left: 9pt; text-indent: 27pt; line-height: 107%; font-size: 11pt"><font style="font: 10pt Times New Roman, Times, Serif">Total unrealized gains included in net loss </font><font style="font: 7pt Times New Roman, Times, Serif">(1)</font><font style="font: 10pt Times New Roman, Times, Serif">	</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(1,182,000</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(5,515,000</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-right: 2.15pt; padding-left: 9pt; text-indent: 27pt; line-height: 107%; font-size: 11pt"><font style="font: 10pt Times New Roman, Times, Serif">Total realized gains included in net loss </font><font style="font: 7pt Times New Roman, Times, Serif">(1)</font><font style="font: 10pt Times New Roman, Times, Serif">	</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif; background-color: white">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif; background-color: white">(152,668</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-right: 2.15pt; padding-left: 9pt; text-indent: 9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Derivative Warrant Liability as of September 30</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">113,155</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">979,155</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td colspan="8" style="line-height: 107%; font-size: 11pt"><font style="font: 7pt Times New Roman, Times, Serif">(1)</font><font style="font: 10pt Times New Roman, Times, Serif">	Included in Gain on Revaluation of Derivative Warrant Liability in the Consolidated Statement of Operations.</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On August 31, 2012, the
Company and Platinum Montaur Life Sciences, LLC (“Montaur”) entered into a Loan Agreement (the “Loan Agreement”)
pursuant to which Montaur made a non-revolving draw credit facility (the “Credit Facility”) of up to $20,000,000 available
to the Company, a substantial portion of which was subject to the successful achievement of certain clinical and regulatory milestones
set forth in the Loan Agreement, with an initial available principal amount of $5,000,000. The principal balance of each draw bore
interest from the applicable draw date until repayment at a rate of 10% per annum, compounded monthly. The Company issued to Montaur
a Promissory Note dated August 31, 2012, with a maturity date of five years from the date of closing. The Company used the proceeds
from the Credit Facility to fund operations. As a result of the Company’s 2013 financing transactions, this Credit Facility
was currently only available at Montaur’s discretion. In addition, for each $1,000,000 of funds borrowed pursuant to the
Credit Facility, the Company agreed to issue Montaur a warrant to purchase 100,000 shares of Common Stock, with a term of five
years and an exercise price equal to 150% of the market price of the Common Stock at the time of the draw, but in no event less
than $20.00 or more than $40.00 per share (together with the Commitment Warrant, the “Warrants”). All of the Warrants
were immediately exercisable and have a term of five years from the issue date. The exercise price of the Warrants is subject to
adjustment for stock splits, combinations or similar events. An exercise under the Warrants could not result in the holder beneficially
owning more than 4.99% or 9.99%, as applicable, of all of the Common Stock outstanding at the time; provided, however, that a Holder
may waive the 4.99% ownership limitation upon sixty-one (61) days advance written notice to the Company.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On September 14, 2012,
the Company submitted a draw request to Montaur in the amount of $3,000,000 in the form required by the Loan Agreement (the “September
Request”). The Company ultimately received the $3,000,000 across three draws in 2012. These draws were recorded on the Consolidated
Balance Sheet under Note Payable, net of the initial $3,000,000 in discounts recorded related to the warrants issued and described
below. In accordance with the Loan Agreement and as a result of funding received from Montaur, the Company issued to Montaur separate
warrants concurrent with the three draws in 2012 to purchase an aggregate of 300,000 shares of Common Stock, with a term of five
years, and having exercise prices ranging from $21.10 to $22.70 per share. The fair value of these warrants issued was determined
to be approximately $3,455,000, of which $3,000,000 was treated as a debt discount and was to be accreted to interest expense over
the term of the note, and the balance of approximately $455,000 was charged to interest expense in 2012.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On March 1, 2013, the
Company elected to prepay all outstanding draws under the Credit Facility totaling $3,113,366, which includes interest accrued
and unpaid to that date of $113,366. After such date, no principal amount was outstanding under the Credit Facility. Concurrent
with this prepayment, the Company recorded non-cash interest expense of approximately $2,879,166 in March 2013 relating to the
unamortized debt discount on the outstanding draws paid off.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Section 3.1 (Prepayment
and Prepayment Notice) of the Loan Agreement states that “The Borrower shall have the option at all times to permanently
prepay any Draw, in whole or in part, by providing to Lender two (2) Business Days prior written notice of the effective date and
amount of such cancellation or prepayment; provided, however, that any such prepayments shall be applied to accrued and unpaid
interest before being applied to principal (such principal payments to be applied to the Draw or Draws as designated by the Borrower
in the Borrower’s discretion). The Borrower shall have the right, upon two (2) Business Days prior written notice to the
Lender, to irrevocably cancel and terminate the Term Loan Facility upon payment of all amounts due and owing hereunder to Lender;
provided, that, it is understood and agreed that the provisions of Article 9 hereof shall survive any such termination.”
As a result of the Company’s contractual ability to obtain funds through this Loan Agreement only at Montaur’s discretion,
the expiration of the Loan Agreement on to December 31, 2014, and the Company’s inability to motivate Montaur to allow the
Company to draw against the Credit Facility to fund operations, the Compnay elected to terminate the Loan Agreement. Accordingly,
on October 28, 2014, the Company notified Montaur that it was irrevocably canceling and terminating the Loan Agreement effective
as of October 30, 2014.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Pursuant to the
Loan Agreement, the Company issued Montaur a warrant to purchase 400,000 shares of its Common Stock, with a term of five
years and an exercise price of $20.00 per share (the “Commitment Warrant”). The fair value of the Commitment
Warrant was determined to be approximately $4,840,000, recorded as a deferred financing cost and the Company had been
amortizing the interest expense over the term of the note. With the Company’s inability to utilize the Credit Facility
on September 30, 2014, and the termination of the Loan Agreement effective October 30, 2014, the Company fully amortized the
remaining $2,823,325 in Deferred Financing Cost as of September 30, 2014. Therefore, amortization of the deferred financing
cost for the three and nine months ended September 30, 2014 was $3,065,325 and $3,549,325, respectively, and is recorded as
interest expense. Amortization of the deferred financing cost for the three and nine months ended September 30, 2013 was
$242,000 and $726,000, respectively.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Management has evaluated
events subsequent to September 30, 2014. In addition to the items discussed in Notes 1, 5 and 14, there are no subsequent events
that require adjustment to or disclosure in the Financial Statements, other than the following.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">As described in
Note 1, on October 2, 2014, the Company announced that it had retained PwC as a financial and restructuring consultant to
assist the Company in exploring financial and strategic alternatives that could sufficiently address its liquidity needs and
allow it to resume operations. Such financial and strategic alternatives include, but are not limited to, a sale and/or
license of intellectual property and other assets, a merger or sale of the Company in entirety, other business combination, a
capital transaction and/or a voluntary petition for reorganization or liquidation pursuant to the U.S. Bankruptcy Code. With
PwC’s support of the process, the Company continues to proceed in an orderly and timely manner to consider possible
financial and strategic alternatives for the Company and their implications. However, no assurances can be given as to
whether any particular financial or strategic alternative will be recommended or undertaken or, if so, upon what terms and
conditions. If the Company is unable to identify an acceptable financial or strategic alternative that sufficiently addresses
the Company’s liquidity or operational needs, the Company could be forced to file for protection under the U.S.
Bankruptcy Code. The engagement agreement between Echo and PwC stated that the Company agreed to pay PwC a $50,000 retainer
upon the execution of the agreement and apply this dollar sum to PwC’s final billing. Additionally, PwC would render
invoices on a regular basis and that were to be paid within five business days if the Company does not file a petition for
relief under Chapter 11 of the U.S. Bankruptcy Code. On November 5, 2014, PwC supplied the Company with a progress billing
invoice for $240,740 related to their advisory services. As of November 18, 2014, the Company has deemed it prudent to
withhold payment as a result of their desire to gain greater detail regarding the description of services rendered.
Accordingly, the Company anticipates that PwC will pursue all remedies available to it up and to including legal action.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On October 2, 2014,
the Company commented on the recent unauthorized public statements relating to the Company that have been made by Michael M.
Goldberg M.D. and Shepard M. Goldberg (“the Goldbergs”), two members of the Company’s Board of Directors that
were either designated or nominated to the Company’s Board by an affiliate of Platinum Management (NY) LLC. The press
release stated that in prior weeks, the Goldbergs had engaged in numerous unauthorized public communications targeted at the
Company’s stockholders, the trading markets and the media. These communications included an unauthorized public investor
conference call during which the Goldbergs made a presentation relating to the Company, unauthorized press releases
discussing the Company and other unauthorized statements by which the Goldbergs have sought to relay to the Company‘s
stockholders information relating to the Company, its prospects and its financing and strategic alternatives. Stockholders
were further advised that all such communications by the Goldbergs have been made solely in their individual capacities and
not as authorized representatives of the Company or the Company’s Board. The Company specifically disclaimed (i) any
responsibility for the Goldbergs’ public statements, communications and other unauthorized actions; (ii) any
responsibility for the accuracy of any of the information relating to the Company, its prospects or its financing and
strategic alternatives that is disseminated by the Goldbergs or those that may be acting in concert with the Goldbergs; and
(iii) any obligation to correct any false and misleading statements and disclosures that may be issued by the Goldbergs or
those that may be acting in concert with the Goldbergs.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 22.5pt">Under Section 5.6 of
the Platinum Securities Purchase Agreement, at the reasonable request of Platinum Partners, the Company is required to
prepare and file with the SEC a Proxy Statement and seek stockholder approval of the issuance of the Common Stock underlying
the Series E Preferred Stock and the warrants. The Company is required to file the Proxy Statement as promptly as reasonably
practicable, but in any event no later than 30 business days following the receipt of the request. Thereafter, as promptly as
reasonably practicable, but in any event no later than three business days after the Proxy Statement becomes definitive, the
Company is required to duly call, give notice to stockholders, convene and hold the Special Meeting, which shall be held no
later than 45 business days following the request. On July 9, 2014, Platinum Partners delivered to the Company a Notice of
Request to Call a Special Meeting of Stockholders, in which Platinum Partners requested pursuant to Section 5.6 of the
Platinum Stock Purchase Agreement that the Company call a special meeting of stockholders to seek stockholder approval of the
issuance of 1,748,613 shares of the Common Stock upon the conversion of the 1,748,613 shares of Series E Preferred Stock (the
“Special Meeting”). On October 16, 2014, the Company filed a Revised Preliminary Proxy Statement regarding the
Special Meeting to consider and act upon a proposal to approve the issuance by the Company of 1,748,613 shares of its Common
Stock, to Platinum Partners Value Arbitrage Fund L.P. (“PPVA”) and Platinum Partners Liquid Opportunity Master
Fund, L.P. (“PPLO” and, together with PPVA, “Platinum”) upon the conversion by Platinum of 1,748,613
shares of Series E Convertible Preferred Stock of the Company, par value $0.01 per share, which would result in Platinum
holding more than 20% of the Company’s outstanding shares of Common Stock, triggering the stockholder approval
requirement under Nasdaq Marketplace Rule 5365(b). At this time, no Record Date for holders of the Common Stock nor the date
of the Special Meeting of Stockholders has been established. If and when a meeting date is established, no other business
will be transacted at the Special Meeting. In accordance with Section 222 of the Delaware General Corporation Law, as amended
(the “DGCL”), and Section 1.3 of Echo’s Amended and Restated Bylaws, the business transacted at the
Special Meeting shall be limited to the purpose stated in this notice of the Special Meeting.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 22.5pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 22.5pt">On September 29, 2014,
Platinum filed with the SEC a Preliminary Proxy Statement on Schedule 14A for the purpose of commencing a proxy contest to purportedly
remove, for “cause”, the only duly-elected independent members of Echo’s Board of Directors that were not designated
or nominated by Platinum, namely William F. Grieco, Vincent D. Enright and James F. Smith (the “Non-Affiliated Independent
Directors”). We believe that the Preliminary Proxy Statement that Platinum filed with the SEC in connection with the special
meeting proxy contest is procedurally and substantively deficient and may involve violations of the federal securities laws and
rules and regulations governing proxy solicitations. Among other issues, Echo believes that Platinum’s proxy materials filed
with the SEC in connection with its purported attempt to remove the three duly-elected Non-Affiliated Independent Directors through
a Special Meeting proxy contest contain numerous inaccuracies, misstatements and untruths. In its numerous conclusory statements,
the Platinum Group has taken upon itself to declare that “<i>cause</i>” exists to remove the Non-Affiliated Independent
Directors even though it has failed to articulate any conduct engaged in by the Non-Affiliated Independent Directors that would
support such a determination consistent with the applicable law of the State of Delaware.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 22.5pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">As described in Note 5,
on August 31, 2012, the Company and Montaur entered into a loan agreement pursuant to which Montaur made a credit facility of up
to $20,000,000 available to the Company, a substantial portion of which is subject to the successful achievement of certain clinical
and regulatory milestones set forth in the Loan Agreement, with an initial available principal amount of $5,000,000. The Company
issued to Montaur a Promissory Note dated August 31, 2012, with a maturity date of five years from the date of closing. On March
1, 2013, the Company elected to prepay all outstanding draws under the Montaur Credit Facility. After such date, no principal amount
was outstanding under the Credit Facility. On October 28, 2014, the Company sent a letter to Montaur notifying them that the Company
was irrevocably cancelling and terminating the loan agreement in accordance with Section 3.1 of the loan agreement as of October
30, 2014 (see Note 5).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On November 6, 2014, the
Company received a letter from the Listing Qualifications Department of the NASDAQ Stock Market (“Nasdaq”) informing
the Company that because the closing bid price for the Company's common stock listed on Nasdaq was below $1.00 for 30 consecutive
business days and therefore out of compliance with the minimum closing bid price requirement for continued listing on the Nasdaq
Capital Market under Nasdaq Marketplace Rule 5550(a)(2). The letter further provides that, under the Nasdaq rules, the Company
has a 180-day compliance period, or until May 5, 2015, to regain compliance with Nasdaq's listing requirements by having the closing
bid price of its common stock be at least $1.00 for at least 10 consecutive trading days. In the event that the Company does not
regain compliance by May 5, 2015, the Company may be granted an additional 180-day compliance period, provided that the Company
(i) meets the continued listing requirement for market value of publicly held shares and all other initial listing standards for
the Nasdaq Capital Market, with the exception of the bid price requirement, and (ii) provides written notice of its intention to
cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. However, if it appears
to the Nasdaq staff that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, the
Nasdaq staff will notify the Company that its common stock will be subject to delisting. In the event that the Company does not
regain compliance within the requisite time period, it would have the right to appeal a delisting determination. Failure to maintain
listing on the Nasdaq Capital Market may have a material adverse effect on the price and/or liquidity of the Company’s common
stock. During this process, shares of the Company's common stock will continue to trade on the Nasdaq Capital Market.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On November 14, 2014,
the Company’s corporate governance counsel withdrew from its representation of the Company effective immediately. On November
17, 2014, the Company’s securities and transactional counsel notified the Company that, after their review of and comment
on the Company’s Form 10-Q was completed, their work for Echo would be concluded and they intended to withdraw from further
representation. Management has identified new outside counsel who is ready to begin providing services to the Company, but the
Company has not retained new counsel at this time. Accordingly, the Company is without external legal representation to advise
on corporate governance, securities and transactions matters. Such counsel remains integral to the Company’s ability to provide
assurance as to the effectiveness of its system of internal controls, to support Management during a time of discord between members
of the Board of Directors, and to assist Management in addressing threats of potential litigation against the Company and public
allegations of wrongdoing against various members of the Company’s Board that have previously made public by the Company
and/or certain members of its Board.</p>
<p style="margin: 0pt"></p>
<p style="font: 11pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 10pt">Echo
Therapeutics, Inc. (the “Company” or “Echo”) is a medical device company with expertise in advanced skin
permeation technology.  The Company was developing its Symphony</font><font style="font-size: 7pt">®</font><font style="font-size: 10pt">
CGM System (“Symphony”) as a non-invasive, wireless continuous glucose monitoring (“CGM”) system for use
initially in hospital critical care units.  The Symphony<b> </b>SkinPrep System (“SkinPrep”), a component
of Symphony, allows for enhanced skin permeation that enables extraction of analytes such as glucose and enhanced delivery of topical
pharmaceuticals.</font></p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The accompanying
unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Sontra Medical,
Inc., a Delaware corporation.  All significant intercompany balances and transactions have been eliminated in consolidation.  These
financial statements have been prepared in conformity with Generally Accepted Accounting Principles (“GAAP”) in the
United States consistent with those applied in, and should be read in conjunction with, the Company’s audited consolidated
financial statements and related footnotes for the year ended December 31, 2013 included in the Company’s Annual Report on
Form 10-K as filed with the United States Securities and Exchange Commission (“SEC”) on March 28, 2014.  These
financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of Management,
necessary for a fair presentation of the Company’s financial position as of September 30, 2014 and its results of operations
and cash flows for the interim periods presented and are not necessarily indicative of results for subsequent interim periods or
for the full year.  These interim financial statements do not include all of the information and footnotes required by
GAAP for complete financial statements as allowed by the relevant SEC rules and regulations; however, the Company believes that
its disclosures are adequate to ensure that the information presented is not misleading.</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On June 7, 2013,
the Company effected a 1-for-10 reverse stock split of its Common Stock.  All share and per share information has been
retroactively restated to reflect this reverse stock split.</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i><u>Liquidity, Going Concern and
Management’s Plans</u></i></b></p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The accompanying
consolidated financial statements have been prepared on a basis assuming that the Company is a Going Concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business.  As of September 30,
2014, the Company had cash of approximately $1,469,000, a negative working capital of approximately $109,000 and an accumulated
deficit of approximately $125,011,000.  In the past, the Company has funded its operations primarily through debt and
equity issuances.</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In August 2014,
the Company announced that it had taken steps to substantially reduce operating costs and preserve cash while further refining
its development efforts and resources needed to implement key product performance enhancements to its Symphony CGM System.  The
Company implemented significant cost reductions across all aspects of its operations in both external spend and workforce, including
reductions in general and administrative, manufacturing, clinical and product development expenditures.  The Company
anticipated a meaningful decrease in expenses as a result of the cost reduction efforts.  As a result of these August
2014 initiatives, which included a 35% reduction in employees, the burn rate in September 2014 was decreased by 40%-50% as compared
to the average monthly burn rate experienced during the first six months of 2014.  At that time, the Company continued
to explore a variety of funding alternatives which it believed, together with the cost reduction initiatives, would be necessary
to permit the Company to ultimately achieve its clinical trial and regulatory approval objectives.  Additionally, the
Company publicly stated that in the absence of a financing or strategic transaction, Echo’s ability to achieve its previously
stated product development timelines would be negatively impacted by the Company’s effort to preserve cash and reduce expenses.</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On
September 23, 2014, the Company announced that it believed that its liquidity was insufficient to fund its needs beyond
September 30, 2014 if its operations continued as they were at that time.  Accordingly, it suspended its product
development, research, manufacturing and clinical programs and operations to conserve its liquidity and capital
resources.  The actions followed a strategic review of the Company’s current financial position, funding
alternatives, and projected product development costs and timelines.  The workforce reduction that resulted from
the suspension of operations comprised approximately 70% of Echo's workforce.  Additionally, events such as the
lawsuits filed or threatened by Platinum Management (NY) LLC (“Platinum”) and its affiliates and the ongoing
interference by Platinum to damage Echo, its prospects and its relationships with its vendors and employees, have caused, and
are expected to continue to cause, a significant liquidity strain on the Company.  Any resumption of operations
would be dependent on Echo’s ability to identify a strategic or financial alternative that would provide the Company
with timely, committed and sufficient third-party funding.  No assurances can be given that Echo will be able to
identify a strategic or financial alternative that would provide the Company with funding sufficient to enable the resumption
of its operations.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On October 2,
2014, the Company announced that it had retained PricewaterhouseCoopers LLP’s Restructuring and Recovery Services
Practice (“PwC”) as a financial and restructuring consultant to assist the Company in exploring financial and
strategic alternatives that could sufficiently address its liquidity needs and allow it to resume operations.  Such
financial and strategic alternatives include, but are not limited to, a sale and/or license of intellectual property and
other assets, a merger or sale of the Company in entirety, other business combination, a capital transaction and/or a voluntary
petition for reorganization or liquidation pursuant to the U.S. Bankruptcy Code.  Echo with PwC’s support,
continues to proceed in an orderly and timely manner to consider possible financial and strategic alternatives for the
Company and their implications.  However, no assurances can be given as to whether any particular financial or
strategic alternative for Echo will be recommended or undertaken or, if so, upon what terms and conditions.  If
Echo is unable to identify an acceptable financial or strategic alternative that sufficiently addresses Echo’s liquidity
needs, the Company could be forced to file for protection under the U.S. Bankruptcy Code.  Echo continues to
aggressively pursue additional financing from existing relationships (current and prior stockholders, investors and lenders)
and from new investors to support operations, including its product and clinical development programs.  The
accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these
uncertainties including the possible write-down of the intangible assets or other assets as of September 30, 2014.</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Pursuant to the
Securities Purchase Agreement (“SPA”) between the Company and Medical Technologies Innovation Asia Ltd. (“MTIA”),
as amended on January 30, 2014, in March 2014 and on June 17, 2014, the Company would sell 1,818,182 shares of its Common Stock
and 181,818 warrants to purchase its Common Stock to MTIA for an aggregate purchase price of $5,000,000, such sales to be made
in three installments through March 27, 2014.  From February 4, 2014 through April 15, 2014, the Company received gross
proceeds of $2,400,000 of the anticipated $5,000,000 in connection with the SPA. In connection with the receipt of those proceeds,
the Company has issued to MTIA 872,728 shares of its Common Stock and 87,274 warrants to purchase its Common Stock (see Note 8).  Based
on representations made by MTIA to the Company, the Company had anticipated the receipt of the full $5,000,000 from MTIA despite
the fact that the funding dates in the SPA, as amended, had passed without receipt of funds from MTIA.  MTIA’s
failure to provide funds in a timely manner resulted in its material breach of the SPA, which has subsequently expired and has
a negative impact on Company’s operations and planned development efforts.  The Company met with representatives
of MTIA on October 22 and 23, 2014, regarding MTIA’s possible investment in the Company.  At the conclusion of
the meeting, MTIA proposed an offer with an approximate 24-hour lifespan that upon execution of a convertible note purchase agreement
with a first stage financing amount of $1,500,000, Echo would be required to turn-over all relevant technical product information
and samples of our Generation 1 Symphony product to MTIA as well as dedicate personnel to support their consumer based business
plan.  As the MTIA offer did not include the previously agreed purchase of the additional $2,600,000 in Company securities
as a prerequisite for the release and support of technical product information, the Company deemed the offer inadequate to warrant
a response.  On October 24, 2014, the Managing Director of MTIA communicated to PwC that they “have no intention
to provide any so-called better offer.”  Accordingly, the Company has ceased pursuing funding from MTIA.</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt; margin-left: 0pt; text-indent: 0pt; text-align: justify"><b><i><u>Management’s
Structure, Staffing and Facilities</u></i></b></p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Effective at midnight
on June 30, 2014, Robert F. Doman’s consulting contract with the Company expired in accordance with its terms and, accordingly,
he no longer serves as the Company’s Executive Chairman and Interim Chief Executive Officer.  On June 30, 2014,
the Board appointed Kimberly A. Burke to serve as Interim Chief Executive Officer of Echo, for a sixty-day period beginning on
July 1, 2014 and ending on August 30, 2014.  Ms. Burke has served as Echo’s General Counsel and Senior Vice President
since January 2011, as Chief Compliance Officer since April 2012, and she has served as Echo’s Secretary since 2010. Ms.
Burke joined the Company as Vice President, Corporate Counsel in 2008.</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On September 12,
2014, Kimberly A. Burke informed the Company of her decision to resign as Senior Vice President, General Counsel and Chief Compliance
Officer of Echo to pursue other opportunities.  Ms. Burke agreed to transition matters appropriately and the effective
date of her resignation will be determined once an effective transition has occurred.  At
this time, Ms. Burke continues to serve Echo as its Senior Vice President, General Counsel, Chief Compliance Officer and Secretary.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Effective July
16, 2014, the Board appointed Charles T. Bernhardt to serve as Interim Chief Financial Officer of Echo.  As the Company
continues to explore financial and strategic alternatives that could sufficiently address its liquidity needs and allow it to resume
operations, it has drastically reduced its workforce to conserve cash.  The Company retained a team of seven key employees
to enable it to explore its financial and strategic alternatives.</p>
<p style="font: 11pt/normal Calibri, Helvetica, Sans-Serif; margin: 0; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The Company leases
approximately 37,000 square feet of manufacturing, laboratory and office space in a single-story building located in Franklin,
Massachusetts under a lease expiring October 31, 2017.  The Company is actively attempting to sublease, some or all, of
this space to conserve cash as well as more efficiently accommodate its projected facilities needs.</p>
<p style="font: 11pt/normal Calibri, Helvetica, Sans-Serif; margin: 0; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The Company also
leases approximately 7,900 square feet of corporate office space in a multi-story building located in Philadelphia, Pennsylvania
under a lease expiring May 31, 2017, with the right to terminate the lease on November 30, 2014.  The Company has reached
an understanding with the landlord that, as of November 1, 2014, the lease will become month-to-month and the monthly rent will
be reduced by 50% while the landlord attempts to rent some, or all, of the current space occupied by the Company.  The
Company expects to be provided 60 days’ notice to vacate its current office space and the landlord has pledged to assist Echo in
locating office space in one of the landlord’s Philadelphia area office buildings that would better fit the Company’s
current needs on a month-to-month basis.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt; margin-left: 0pt; text-indent: 0pt; text-align: justify"><b><i><u>Reclassifications</u></i></b></p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Certain expenses
prior to the second quarter of 2014 were reclassified to correspond with the current reporting structure for the nine months ended
2014.  In prior periods, Research & Development (“R&D”) facilities expense and related personnel benefits
were recognized as Sales, General and Administrative (“SG&A”) expenses.  Where relevant, recognition is
given to the impact of this reclassification.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt; margin-left: 0pt; text-indent: 0pt; text-align: justify"><b><i><u>Recently
Issued Accounting Standards</u></i></b></p>
<p style="font: 11pt/normal Calibri, Helvetica, Sans-Serif; margin: 0; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In May 2014, the
Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue
from Contracts with Customers”, which provides guidance for revenue recognition. The standard’s core principle is that
a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration
to which the company expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosures.
ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016. We are currently in the process of evaluating
the impact of the adoption of this ASU on the financial statements.</p>
<p style="font: 11pt/normal Calibri, Helvetica, Sans-Serif; margin: 0; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In April 2014,
the FASB issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”
which changes the criteria for determining which disposals can be presented as discontinued operations and modifies the related
disclosure requirements. Under the new guidance, a disposal of a component of an entity or a group of components of an entity is
required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major
effect on an entity’s operations and financial results and is disposed of or classified as held for sale. The standard also
introduces several new disclosures. The guidance applies prospectively to new disposals and new classifications of disposal groups
as held for sale after the effective date. ASU 2014-08 is effective for annual and interim periods beginning after December 15,
2014, with early adoption permitted. We are currently in the process of evaluating the impact of adoption of this ASU on the financial
statements.</p>
<p style="font: 11pt/normal Calibri, Helvetica, Sans-Serif; margin: 0; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In August 2014,
the FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40); Disclosure of
Uncertainties about an Entity’s Ability to Continue as a Going Concern” which applies should a company be facing probable
liquidation within one year of the issuance of the financial statements, but is not actually in liquidation at the time of issuance.  The
applicable accounting basis for presentation remains as a going concern, but if liquidation within one year is probable, then
certain disclosures must be included in the financial statement presentation.  ASU 2014-15 is effective for annual and
interim periods beginning after December 15, 2016, with early adoption permitted.  We are currently in the process of
evaluating the impact of adoption of this ASU on the financial statements.</p>
<p style="font: 11pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 10pt">Echo
Therapeutics, Inc. (the “Company” or “Echo”) is a medical device company with expertise in advanced skin
permeation technology.  The Company was developing its Symphony</font><font style="font-size: 7pt">®</font><font style="font-size: 10pt">
CGM System (“Symphony”) as a non-invasive, wireless continuous glucose monitoring (“CGM”) system for use
initially in hospital critical care units.  The Symphony<b> </b>SkinPrep System (“SkinPrep”), a component
of Symphony, allows for enhanced skin permeation that enables extraction of analytes such as glucose and enhanced delivery of topical
pharmaceuticals.</font></p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The accompanying
unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Sontra Medical,
Inc., a Delaware corporation.  All significant intercompany balances and transactions have been eliminated in consolidation.  These
financial statements have been prepared in conformity with Generally Accepted Accounting Principles (“GAAP”) in the
United States consistent with those applied in, and should be read in conjunction with, the Company’s audited consolidated
financial statements and related footnotes for the year ended December 31, 2013 included in the Company’s Annual Report on
Form 10-K as filed with the United States Securities and Exchange Commission (“SEC”) on March 28, 2014.  These
financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of Management,
necessary for a fair presentation of the Company’s financial position as of September 30, 2014 and its results of operations
and cash flows for the interim periods presented and are not necessarily indicative of results for subsequent interim periods or
for the full year.  These interim financial statements do not include all of the information and footnotes required by
GAAP for complete financial statements as allowed by the relevant SEC rules and regulations; however, the Company believes that
its disclosures are adequate to ensure that the information presented is not misleading.</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On June 7, 2013,
the Company effected a 1-for-10 reverse stock split of its Common Stock.  All share and per share information has been
retroactively restated to reflect this reverse stock split.</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i><u>Liquidity, Going Concern and
Management’s Plans</u></i></b></p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The accompanying
consolidated financial statements have been prepared on a basis assuming that the Company is a Going Concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business.  As of September 30,
2014, the Company had cash of approximately $1,469,000, a negative working capital of approximately $109,000 and an accumulated
deficit of approximately $125,011,000.  In the past, the Company has funded its operations primarily through debt and
equity issuances.</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In August 2014,
the Company announced that it had taken steps to substantially reduce operating costs and preserve cash while further refining
its development efforts and resources needed to implement key product performance enhancements to its Symphony CGM System.  The
Company implemented significant cost reductions across all aspects of its operations in both external spend and workforce, including
reductions in general and administrative, manufacturing, clinical and product development expenditures.  The Company
anticipated a meaningful decrease in expenses as a result of the cost reduction efforts.  As a result of these August
2014 initiatives, which included a 35% reduction in employees, the burn rate in September 2014 was decreased by 40%-50% as compared
to the average monthly burn rate experienced during the first six months of 2014.  At that time, the Company continued
to explore a variety of funding alternatives which it believed, together with the cost reduction initiatives, would be necessary
to permit the Company to ultimately achieve its clinical trial and regulatory approval objectives.  Additionally, the
Company publicly stated that in the absence of a financing or strategic transaction, Echo’s ability to achieve its previously
stated product development timelines would be negatively impacted by the Company’s effort to preserve cash and reduce expenses.</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On September 23,
2014, the Company announced that it believed that its liquidity was insufficient to fund its needs beyond September 30, 2014 if
its operations continued as they were at that time.  Accordingly, it suspended its product development, research, manufacturing
and clinical programs and operations to conserve its liquidity and capital resources.  The actions followed a strategic
review of the Company’s current financial position, funding alternatives, and projected product development costs and timelines.  The
workforce reduction that resulted from the suspension of operations comprised approximately 70% of Echo's workforce.  Additionally,
events such as the lawsuits filed or threatened by Platinum Management (NY) LLC (“Platinum”) and its affiliates and
the ongoing interference by Platinum to damage Echo, its prospects and its relationships with its vendors and employees, have caused,
and are expected to continue to cause, a significant liquidity strain on the Company.  Any resumption of operations would
be dependent on Echo’s ability to identify a strategic or financial alternative that would provide the Company with timely,
committed and sufficient third-party funding.  No assurances can be given that Echo will be able to identify a strategic
or financial alternative that would provide Echo with funding sufficient to enable Echo to resume its operations.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On October 2, 2014,
the Company announced that it had retained PricewaterhouseCoopers LLP’s Restructuring and Recovery Services Practice (“PwC”)
as a financial and restructuring consultant to assist the Company in exploring financial and strategic alternatives that could
sufficiently address its liquidity needs and allow it to resume operations.  Such financial and strategic alternatives
includes, but are not limited to, a sale and/or license of intellectual property and other assets, a merger, other business combination,
a capital transaction and/or a voluntary petition for reorganization or liquidation pursuant to the U.S. Bankruptcy Code.  Echo
with PwC’s support, continues to proceed in an orderly and timely manner to consider possible financial and strategic alternatives
for the Company and their implications.  However, no assurances can be given as to whether any particular financial or
strategic alternative for Echo will be recommended or undertaken or, if so, upon what terms and conditions.  If Echo
is unable to identify an acceptable financial or strategic alternative that sufficiently addresses Echo’s liquidity needs,
the Company could be forced to file for protection under the U.S. Bankruptcy Code.  Echo continues to aggressively pursue
additional financing from existing relationships (current and prior stockholders, investors and lenders) and from new investors
to support operations, including its product and clinical development programs.  The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of these uncertainties including the possible write-down
of the intangible assets or other assets as of September 30, 2014.</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Pursuant to the
Securities Purchase Agreement (“SPA”) between the Company and Medical Technologies Innovation Asia Ltd. (“MTIA”),
as amended on January 30, 2014, in March 2014 and on June 17, 2014, the Company would sell 1,818,182 shares of its Common Stock
and 181,818 warrants to purchase its Common Stock to MTIA for an aggregate purchase price of $5,000,000, such sales to be made
in three installments through March 27, 2014.  From February 4, 2014 through April 15, 2014, the Company received gross
proceeds of $2,400,000 of the anticipated $5,000,000 in connection with the SPA. In connection with the receipt of those proceeds,
the Company has issued to MTIA 872,728 shares of its Common Stock and 87,274 warrants to purchase its Common Stock (see Note 8).  Based
on representations made by MTIA to the Company, the Company had anticipated the receipt of the full $5,000,000 from MTIA despite
the fact that the funding dates in the SPA, as amended, had passed without receipt of funds from MTIA.  MTIA’s
failure to provide funds in a timely manner resulted in its material breach of the SPA, which has subsequently expired and have
a negative impact on Company’s operations and planned development efforts.  The Company met with representatives
of MTIA on October 22 and 23, 2014, regarding MTIA’s possible investment in the Company.  At the conclusion of
the meeting, MTIA proposed an offer with an approximate 24-hour lifespan that upon execution of a convertible note purchase agreement
with a first stage financing amount of $1,500,000, Echo would be required to turn-over all relevant technical product information
and samples of our Generation 1 Symphony product to MTIA as well as dedicate personnel to support their consumer based business
plan.  As the MTIA offer did not include the previously agreed purchase of the additional $2,600,000 in Company securities
as a prerequisite for the release and support of technical product information, the Company deemed the offer inadequate to warrant
a response.  On October 24, 2014, the Managing Director of MTIA communicated to PwC that they “have no intention
to provide any so-called better offer.”  Accordingly, the Company has ceased pursuing funding from MTIA.</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"><b><i><u>Reclassifications</u></i></b></p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Certain expenses
prior to the second quarter of 2014 were reclassified to correspond with the current reporting structure for the nine months ended
2014.  In prior periods, Research & Development (“R&D”) facilities expense and related personnel
benefits were recognized as Sales, General and Administrative (“SG&A”) expenses.  Where relevant, recognition
is given to the impact of this reclassification.</p>
<p style="font: 11pt/normal Calibri, Helvetica, Sans-Serif; margin: 0; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In May 2014, the
Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue
from Contracts with Customers”, which provides guidance for revenue recognition. The standard’s core principle is that
a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration
to which the company expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosures.
ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016. We are currently in the process of evaluating
the impact of adoption of this ASU on the financial statements.</p>
<p style="font: 11pt/normal Calibri, Helvetica, Sans-Serif; margin: 0; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In April 2014,
the FASB issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”
which changes the criteria for determining which disposals can be presented as discontinued operations and modifies the related
disclosure requirements. Under the new guidance, a disposal of a component of an entity or a group of components of an entity is
required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major
effect on an entity’s operations and financial results and is disposed of or classified as held for sale. The standard also
introduces several new disclosures. The guidance applies prospectively to new disposals and new classifications of disposal groups
as held for sale after the effective date. ASU 2014-08 is effective for annual and interim periods beginning after December 15,
2014, with early adoption permitted. We are currently in the process of evaluating the impact of adoption of this ASU on the financial
statements.</p>
<p style="font: 11pt/normal Calibri, Helvetica, Sans-Serif; margin: 0; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In August 2014,
the FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40); Disclosure
of Uncertainties about an Entity’s Ability to Continue as a Going Concern” which applies should a company be facing
probable liquidation within one year of the issuance of the financial statements, but is not actually in liquidation at the time
of issuance.  The applicable accounting basis for presentation remains as a going concern, but if liquidation within
one year is probable, then certain disclosures must be included in the financial statement presentation.  ASU 2014-15
is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted.  We are
currently in the process of evaluating the impact of adoption of this ASU on the financial statements.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2014</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2013</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 64%; padding-right: 5.05pt; padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Risk-free interest rate</font></td>
<td style="width: 1%; text-align: right; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 15%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1.75% – 2.08</font></td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td style="width: 1%; text-align: right; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 15%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">0.13% - 1.89</font></td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-right: 5.05pt; padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Expected dividend yield</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-right: 5.05pt; padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Expected term</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td colspan="2" style="padding-left: 0.25in; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5.5 - 6.5 years</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td colspan="2" style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1.0 - 6.5 years</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-right: 5.05pt; padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Forfeiture rate (excluding fully vested Stock Options)</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">15</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">15</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-right: 5.05pt; padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Expected volatility</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">120% - 141</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">129% - 141</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>Stock Options</b></p></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Shares</b></p></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Weighted-</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Average</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Exercise</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Price</b></p></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Weighted-</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Average</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Remaining</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Contractual</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Term</b></p></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Aggregate</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Intrinsic</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Value</b></p></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding options at January 1, 2014</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,455,432</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4.90</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.25in; text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">187,950</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3.08</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.25in; text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Exercised</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.25in; text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Forfeited or expired</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(905,228</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4.19</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 51%; padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding options at September 30, 2014</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="width: 10%; border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">738,154</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 10%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5.32</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 10%; border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">7.66 years</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 10%; border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Exercisable options at September 30, 2014</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">328,422</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">8.02</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5.75 years</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The Company uses
valuation methods and assumptions that consider among other factors the fair value of the underlying stock, risk-free interest
rate, volatility, expected life and dividend rates in estimating fair value for the warrants considered to be derivative instruments.  The
following assumptions were utilized by the Company:</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2014</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2013</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 64%; text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Risk-free interest rate</font></td>
<td style="width: 1%; text-align: right; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 15%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1.44% - 1.85</font></td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td style="width: 1%; text-align: right; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 15%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">0.65% - 1.85</font></td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Expected dividend yield</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Expected term (contractual term)</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td colspan="2" style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2.9 – 3.1 years</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td colspan="2" style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4.2 – 4.4 years</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Expected volatility</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">120% - 122</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">121% - 123</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
</table>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Expected volatilities
are based on historical volatility of the Common Stock using historical periods consistent with the expected term of the warrant.  The
risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the warrant.</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">In the nine months
ended September 30, 2014, the Company issued 87,274 warrants in connection with partial closings related to the private placement
of the Company’s Common Stock with MTIA (See Note 8).</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in">At September 30, 2014, the Company had
the following outstanding warrants:</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Number of</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Shares</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Exercisable</b></p></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Exercise Price</b></font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Date of Expiration</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Outstanding warrants accounted for as Derivative Warrant liability:</b></font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to debt holder</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 12%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">400,000</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; text-align: right; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">20.00</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 12%; padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">8/31/2017</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to debt holder</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">100,000</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">21.30</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">9/20/2017</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to debt holder</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">50,000</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">22.70</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">10/17/2017</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to debt holder</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">150,000</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">21.10</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">11/6/2017</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 0.25in; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Total outstanding warrants accounted for as Derivative Warrant liability</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">700,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted average exercise price</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">20.61</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted average time to expiration</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2.98 years</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Outstanding warrants accounted for as equity:</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to investors in private placement</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">76,800</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">20.00</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">11/13/2014</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to placement agent in private placement</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">25,695</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">15.00</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">11/13/2014</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to investors in private placement</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">6,300</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">20.00</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">12/3/2014</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to investors in private placement</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">34,147</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">22.50</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2/9/2015</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to placement agents in private placement</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2,853</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">22.50</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2/9/2015</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to investor in private placement</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">638</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">22.50</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3/18/2015</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to investors in private placement</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">95,960</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">30.00</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">12/7/2014</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to investors in private placement of common and preferred stock</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">181,818</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2.75</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">12/10/2018</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to investors in private placement of common stock</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">18,182</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2.75</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2/20/2019</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to investors in private placement of common stock</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">69,092</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2.75</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">6/17/2019</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt; text-indent: 0.25in; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Total outstanding warrants accounted for as equity</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">511,485</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted average exercise price</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">12.73</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted average time to expiration</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1.58 years</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Totals for all warrants outstanding:</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 9pt; text-indent: 0.25in; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Total</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,211,485</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted average exercise price</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">17.29</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted average time to expiration</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2.72 years</font></td></tr>
</table>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">A summary of warrants
activity for the nine months ended September 30, 2014 is as follows:</p>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Warrants</b></p></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><b>  </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Shares</b></p></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Weighted-</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Average</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Exercise</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Price</b></p></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%; text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding warrants at January 1, 2014</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,209,211</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">17.92</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 27pt; text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Granted</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">87,274</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2.75</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 27pt; text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Exercised</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">            Forfeited or expired</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(85,000</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">11.35</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding warrants at September 30, 2014	</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,211,485</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">17.29</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0">  </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2014</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2013</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 64%; text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Risk-free interest rate</font></td>
<td style="width: 1%; text-align: right; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 15%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1.44% - 1.85</font></td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td style="width: 1%; text-align: right; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 15%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">0.65% - 1.85</font></td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Expected dividend yield</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Expected term (contractual term)</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td colspan="2" style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2.9 – 3.1 years</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td colspan="2" style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4.2 – 4.4 years</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Expected volatility</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">120% - 122</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">121% - 123</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
</table>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Warrants</b></p></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><b>  </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Shares</b></p></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Weighted-</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Average</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Exercise</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Price</b></p></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%; text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding warrants at January 1, 2014</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,209,211</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">17.92</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 27pt; text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Granted</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">87,274</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2.75</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 27pt; text-align: justify; line-height: 107%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Exercised</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">            Forfeited or expired</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(85,000</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">11.35</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding warrants at September 30, 2014	</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,211,485</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">17.29</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Number of</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Shares</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Exercisable</b></p></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Exercise Price</b></font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Date of Expiration</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Outstanding warrants accounted for as Derivative Warrant liability:</b></font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to debt holder</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 12%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">400,000</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; text-align: right; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">20.00</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 12%; padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">8/31/2017</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to debt holder</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">100,000</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">21.30</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">9/20/2017</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to debt holder</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">50,000</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">22.70</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">10/17/2017</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to debt holder</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">150,000</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">21.10</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">11/6/2017</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 0.25in; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Total outstanding warrants accounted for as Derivative Warrant liability</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">700,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted average exercise price</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">20.61</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted average time to expiration</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2.98 years</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Outstanding warrants accounted for as equity:</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to investors in private placement</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">76,800</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">20.00</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">11/13/2014</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to placement agent in private placement</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">25,695</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">15.00</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">11/13/2014</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to investors in private placement</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">6,300</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">20.00</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">12/3/2014</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to investors in private placement</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">34,147</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">22.50</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2/9/2015</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to placement agents in private placement</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2,853</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">22.50</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2/9/2015</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to investor in private placement</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">638</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">22.50</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3/18/2015</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to investors in private placement</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">95,960</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">30.00</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">12/7/2014</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to investors in private placement of common and preferred stock</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">181,818</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2.75</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">12/10/2018</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to investors in private placement of common stock</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">18,182</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2.75</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2/20/2019</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted to investors in private placement of common stock</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">69,092</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2.75</font></td>
<td style="line-height: 107%"> </td>
<td style="padding-right: 8.1pt; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">6/17/2019</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt; text-indent: 0.25in; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Total outstanding warrants accounted for as equity</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">511,485</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted average exercise price</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">12.73</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted average time to expiration</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1.58 years</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Totals for all warrants outstanding:</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 9pt; text-indent: 0.25in; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Total</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,211,485</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted average exercise price</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">17.29</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 9pt; text-indent: -9pt; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted average time to expiration</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2.72 years</font></td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The Company leases
approximately 37,000 square feet of manufacturing, laboratory and office space in a single-story building located in Franklin,
Massachusetts under a lease expiring October 31, 2017.  The Company is actively attempting to sublease some, or all, of
this space to conserve cash as well as more efficiently accommodate the projected needs of the facility.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The Company also
leases approximately 7,900 square feet of corporate office space in a multi-story building located in Philadelphia, Pennsylvania
under a lease expiring May 31, 2017, with the right to terminate the lease on November 30, 2014 at a cost that the Company
has approximated at $43,000.  The Company has reached an understanding with the landlord that, as of November 1, 2014,the
lease will become month-to-month and the monthly rent will be reduced by 50% while the landlord attempts to rent some or all of
the current space occupied by the Company.  The Company expects to be provided 60 days’ notice to vacate its current office
space and the landlord has pledged to assist Echo in locating office space in one of the landlord’s Philadelphia area office
buildings that would better fit the Company’s current needs on a month-to-month basis.</p>
<p style="font: 11pt/normal Calibri, Helvetica, Sans-Serif; margin: 0; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">As of October 7,
2014, the Company terminated its lease of a corporate apartment in Franklin, Massachusetts prior to the expiration date of November
21, 2014.  The landlord has charged the Company an early termination fee of $305, which the Company has disputed due
to a former Company employee agreeing to take over the lease as of October 7, 2014.</p>
<p style="font: 11pt/normal Calibri, Helvetica, Sans-Serif; margin: 0; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Future minimum
lease payments for each of the next five years under the current terms of these operating leases at September 30, 2014 are approximately
as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Franklin</b></font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Philadelphia</b></font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Total</b></font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Year Ending December 31,</font></td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 64%; text-indent: 12pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2014</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">113,000</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">31,333</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">144,333</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2015</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">457,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">457,000</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2016</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">468,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">468,000</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2017</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">389,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">389,000</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-indent: 12pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2018</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-indent: 12pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Total</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,427,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">31,333</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,458,333</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The Company’s
facilities lease expense, including accruals for lease incentives, was approximately $143,000 and $141,000 for the three months
ended September 30, 2014 and 2013, respectively, and $418,000 and $530,000 for the nine months ended September 30, 2014 and 2013,
respectively.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b><i><u>Management’s Structure, Staffing and Facilities</u></i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Effective at midnight
on June 30, 2014, Robert F. Doman’s consulting contract with the Company expired in accordance with its terms and, accordingly,
he no longer serves as the Company’s Executive Chairman and Interim Chief Executive Officer.  On June 30, 2014,
the Board appointed Kimberly A. Burke to serve as Interim Chief Executive Officer of Echo, for a sixty-day period beginning on
July 1, 2014 and ending on August 30, 2014.  Ms. Burke has served as Echo’s General Counsel and Senior Vice President
since January 2011, as Chief Compliance Officer since April 2012, and she has served as Echo’s Secretary since 2010. Ms.
Burke joined the Company as Vice President, Corporate Counsel in 2008.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On September 12,
2014, Kimberly A. Burke informed the Company of her decision to resign as Senior Vice President, General Counsel and Chief Compliance
Officer of Echo to pursue other opportunities.  Ms. Burke agreed to transition matters appropriately and the effective
date of her resignation will be determined once an effective transition has occurred.  At
this time, Ms. Burke continues to serve Echo as its Senior Vice President, General Counsel, Chief Compliance Officer and Secretary.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Effective July
16, 2014, the Board appointed Charles T. Bernhardt to serve as Interim Chief Financial Officer of Echo.  As the Company
continues to explore financial and strategic alternatives that could sufficiently address its liquidity needs and allow it to resume
operations, it has drastically reduced its workforce to conserve cash.  The Company retained a team of seven key employees
to enable it to explore its financial and strategic alternatives.</p>
<p style="font: 11pt/normal Calibri, Helvetica, Sans-Serif; margin: 0; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The Company leases
approximately 37,000 square feet of manufacturing, laboratory and office space in a single-story building located in Franklin,
Massachusetts under a lease expiring October 31, 2017.  The Company is actively attempting to sublease some or all of
this space to conserve cash as well as more efficiently accommodate its projected facilities needs.</p>
<p style="font: 11pt/normal Calibri, Helvetica, Sans-Serif; margin: 0; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The Company also
leases approximately 7,900 square feet of corporate office space in a multi-story building located in Philadelphia, Pennsylvania
under a lease expiring May 31, 2017, with the right to terminate the lease on November 30, 2014.  The Company has reached
an understanding with the landlord that, as of November 1, 2014, the lease will become month-to-month and the monthly rent will
be reduced by 50% while the landlord attempts to rent some, or all, of the current space occupied by the Company.  The
Company expects to be provided 60 days notice to vacate its current office space and the landlord has pledged to assist Echo in
locating office space in one of the landlord’s Philadelphia area office buildings that would better fit the Company’s
current needs on a month-to-month basis.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 11pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 10pt">The
Company’s intangible assets are related to the acquisition of assets from Durham Pharmaceuticals Ltd. in 2007.  Following
the acquisition in 2007, the Company has modestly advanced the development programs for Durhalieve</font><font style="font-size: 7pt">TM</font><font style="font-size: 10pt">
for the treatment of corticosteroid-responsive dermatoses and for other earlier stage AzoneTS reformulation drug candidates.  Among
other activities, the Company has monitored stability on new drug formulations, assembled a complete response on the Durhalieve
New Drug Application (“NDA”), met with the United States Food and Drug Administration (“FDA”) on development
status, worked on a response for the methotrexate-AzoneTS (“MAZ”) ‘end of Phase 2’ meeting with the FDA,
engaged consultants to review and recommend new product candidates and formulations, and conducted partnering activities around
the technology.  In addition, the Company has made applicable regulatory filings necessary to maintain the active status
of the AzoneTS Drug Master File, the Durhalieve and MAZ Investigational New Drug applications and the MAZ Orphan Drug application
with the FDA.</font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">As of September
30, 2014 and December 31, 2013, intangible assets related to this acquisition are summarized as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2014</b></font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2013</b></font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Estimated</b></font></td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Accumulated</b></font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Life</b></font></td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Cost</b></font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Amortization</b></font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Net</b></font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Net</b></font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-right: 5.05pt; padding-left: 9pt; text-indent: -9pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Contract related intangible asset:</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 38%; padding-right: 5.05pt; padding-left: 0.25in; text-indent: -9pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Cato Research discounted contract</font></td>
<td style="width: 9%; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">3 years</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">355,000</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">355,000</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 14%; border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-right: 5.05pt; padding-left: 9pt; text-indent: -9pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Technology related intangible assets:</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-right: 5.05pt; padding-left: 0.25in; text-indent: -9pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Patents for the AzoneTS-based product candidates and formulation</font></td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">4 years</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,305,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,305,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,305,000</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-right: 5.05pt; padding-left: 0.25in; text-indent: -9pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Drug Master Files containing formulation, clinical and safety documentation used by the FDA</font></td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">4 years</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,500,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,500,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,500,000</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-right: 5.05pt; padding-left: 0.25in; text-indent: -9pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">In-process pharmaceutical products for 2 indications</font></td>
<td style="text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">4 years</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">6,820,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">6,820,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">6,820,000</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-right: 5.05pt; padding-left: 45pt; text-indent: -9pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Total technology related intangible assets</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">9,625,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">9,625,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">9,625,000</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-right: 5.05pt; text-indent: 0.75in; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Total, net</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">9,980,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">355,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">9,625,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">9,625,000</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Intangible assets
related to technology are expected to be amortized on a straight-line basis over the period ending in September 2019, when the
underlying patents expire, and will commence upon revenue generation which the Company estimates could occur with proper funding
as early as the third quarter of 2016.  The Cato Research contract included above was amortized over a three-year period,
which ended in 2010.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Estimated amortization
expense for each of the next five calendar years is as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p></td>
<td style="line-height: 115%"> </td>
<td colspan="2">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Estimated</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Amortization</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 4.1pt"><b>Expense</b></p></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 82%; text-align: justify; line-height: 115%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">2014</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 15%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 115%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">2015</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 115%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">2016</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,480,800</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 115%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">2017</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,961,600</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 115%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">2018</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,961,600</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The Company annually
reviews the carrying value of intangible assets and considers events or circumstances that would indicate that the carrying amount
of the intangible assets may not be recoverable.  If such events or circumstances exist, the Company performs an impairment
test.  If the carrying value of the intangibles exceeds undiscounted cash flows, the Company writes down the carrying
value of the intangible assets to their fair value in the period identified.  It is the Company’s policy to evaluate
intangible assets for impairment at least annually in connection with its year-end financial statement preparation.  Given
current circumstances, the Company believes that the carrying value of the intangible assets as of September 30, 2014 remains recoverable
despite the current curtailment of operations.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i><u>Cash and Cash Equivalents</u></i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">As of September
30, 2014, the Company held approximately $1,469,000 in cash and cash equivalents.  The Company’s cash equivalents
consist solely of bank money market funds.  The Company maintains its cash in bank deposit accounts which, at times,
may exceed federally insured limits.  The Company has never experienced any losses related to these balances.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i><u>Restricted Cash</u></i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">As of
September 30, 2014, restricted cash represents a $52,488 letter of credit issued in favor of one of its landlords, which is a
condition of the lease.  As of December 31, 2013, restricted cash consisted of a $250,000 letter of credit issued
in favor of one of the Company’s key product development vendors and a $52,488 letter of credit issued in favor of one
of its landlords.  Non-current restricted cash as of September 30, 2014 and December 31, 2013 represent a security
deposit on the Company’s leased offices.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The fair value
of each award of an option to purchase Common Stock (collectively, “Stock Options”) is estimated on the date of grant
using the Black-Scholes-Merton option pricing model with certain assumptions noted below.  Expected volatilities are
based on historical volatility of the Common Stock using historical periods consistent with the expected term of the options.  The
Company uses historical data, as well as subsequent events occurring prior to the issuance of the financial statements, to estimate
option exercise and employee termination and forfeitures within the valuation model.  The expected term of Stock Options
granted under the Company’s stock plans is based on the average of the contractual term (generally 10 years) and the vesting
period (generally 12 to 42 months).  The risk-free rate is based on the yield of a U.S. Treasury security with a term
consistent with the option.</p>
<p style="font: 11pt/normal Calibri, Helvetica, Sans-Serif; margin: 0; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">For Stock Options
issued and outstanding during the nine month period ended September 30, 2014 and 2013, the Company recorded adjustments to paid-in
capital and non-cash compensation expense of $708,000 and $554,000, respectively, each net of estimated forfeitures.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The assumptions
used principally for Stock Options granted to employees and members of the Company’s Board of Directors in the nine months
ended September 30, 2014 and 2013 were as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2014</b></font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2013</b></font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 64%; padding-right: 5.05pt; padding-left: 9pt; text-indent: -9pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Risk-free interest rate</font></td>
<td style="width: 1%; text-align: right; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 15%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1.75% – 2.08</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td style="width: 1%; text-align: right; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 15%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">0.13% - 1.89</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-right: 5.05pt; padding-left: 9pt; text-indent: -9pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Expected dividend yield</font></td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-right: 5.05pt; padding-left: 9pt; text-indent: -9pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Expected term</font></td>
<td style="text-align: right; line-height: 115%"> </td>
<td colspan="2" style="padding-left: 0.25in; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">5.5 - 6.5 years</font></td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td colspan="2" style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1.0 - 6.5 years</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-right: 5.05pt; padding-left: 9pt; text-indent: -9pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Forfeiture rate (excluding fully vested Stock Options)</font></td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">15</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">15</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-right: 5.05pt; padding-left: 9pt; text-indent: -9pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Expected volatility</font></td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">120% - 141</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">129% - 141</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">A summary of Stock
Option activity as of and for the nine months ended September 30, 2014 is as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>Stock Options</b></p></td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Shares</b></p></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Weighted-</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Average</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Exercise</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Price</b></p></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Weighted-</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Average</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Remaining</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Contractual</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Term</b></p></td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Aggregate</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Intrinsic</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Value</b></p></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 9pt; text-indent: -9pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding options at January 1, 2014</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,455,432</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">4.90</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.25in; text-indent: 12pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">187,950</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">3.08</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.25in; text-indent: 12pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Exercised</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.25in; text-indent: 12pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Forfeited or expired</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(905,228</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">4.19</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 51%; padding-left: 9pt; text-indent: -9pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding options at September 30, 2014</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="width: 10%; border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">738,154</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 10%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">5.32</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 10%; border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">7.66 years</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 10%; border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt; text-indent: -9pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Exercisable options at September 30, 2014</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">328,422</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">8.02</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">5.75 years</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The weighted-average
grant-date fair value of Stock Options granted during the nine months ended September 30, 2014 was $3.08 per share.  As
of September 30, 2014, there was approximately $602,000 of total unrecognized compensation expense related to non-vested share-based
Stock Option compensation arrangements. With the exception of the unrecognized share-based compensation related to certain restricted
stock grants to Officers and employees that contain performance conditions related to FDA approval for Symphony or the sale of
substantially all of the stock or assets of the Company, unrecognized compensation is expected to be recognized over the next 5.25
years.</p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Equity Compensation Plans</b></font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Not Pursuant to a Plan</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2003 Plan</b></font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2008 Plan</b></font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="3" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1pt solid; text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Shares Available For Issuance</b></font></td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="3" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 9pt; text-align: justify; line-height: 115%; text-indent: -9pt"><font style="font: 10pt Times New Roman, Times, Serif">Total reserved for stock options and restricted stock</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">160,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">10,000,000</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="3" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.25in; text-align: justify; line-height: 115%; text-indent: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">Net restricted stock issued net of cancellations</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(10,000</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(108,550</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td colspan="3" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.25in; text-align: justify; line-height: 115%; text-indent: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">Stock options granted</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(154,449</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(1,700,883</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td colspan="3" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.25in; text-align: justify; line-height: 115%; text-indent: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">Add back options cancelled before exercise</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">79,849</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,043,729</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="3" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.25in; text-align: justify; line-height: 115%; text-indent: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">Less shares no longer available due to Plan expiration</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(75,400</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="3" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt; text-align: justify; line-height: 115%; text-indent: -9pt"><font style="font: 10pt Times New Roman, Times, Serif">Remaining shares available for future grants at September 30, 2014</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">9,234,296</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="3" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td colspan="9" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; width: 63%; text-align: justify; line-height: 115%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Stock options granted</font></td>
<td style="vertical-align: bottom; width: 1%; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 1%; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 9%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">154,449</font></td>
<td style="vertical-align: bottom; width: 1%; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 1%; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 1%; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 9%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,700,883</font></td>
<td style="vertical-align: bottom; width: 1%; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 1%; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 1%; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 9%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">310,000</font></td>
<td style="vertical-align: bottom; width: 1%; line-height: 115%"> </td>
<td style="vertical-align: top; width: 1%; line-height: 115%"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom; text-align: justify; line-height: 115%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Less:Stock options cancelled</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(79,849</font></td>
<td style="vertical-align: bottom; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(1,043,729</font></td>
<td style="vertical-align: bottom; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(188,333</font></td>
<td style="vertical-align: bottom; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="vertical-align: top; line-height: 115%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; text-align: justify; line-height: 115%; text-indent: 27pt"><font style="font: 10pt Times New Roman, Times, Serif">Stock options exercised</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(35,600</font></td>
<td style="vertical-align: bottom; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(13,000</font></td>
<td style="vertical-align: bottom; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(66,667</font></td>
<td style="vertical-align: bottom; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="vertical-align: top; line-height: 115%"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom; text-align: justify; line-height: 115%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Net options outstanding before restricted stock</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">39,000</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">644,154</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">55,000</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; text-align: justify; line-height: 115%; text-indent: 12pt"><font style="font: 10pt Times New Roman, Times, Serif">Net restricted stock issued net of cancellations</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">10,000</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">108,550</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">6,485</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom; text-align: justify; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding options and restricted shares at September 30, 2014</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">49,000</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">752,704</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">61,485</font></td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">The Company has
authorized 150,000,000 shares of Common Stock, of which 12,648,353 and 11,776,578 shares were issued and outstanding as of September
30, 2014 and December 31, 2013, respectively.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>January 2013 Financing</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On January 31,
2013 and February 1, 2013, the Company entered into underwriting agreements (collectively, the “Underwriting Agreements”)
with Aegis Capital Corp. (“Aegis”), as a representative of several underwriters, with respect to the issuance and sale
in an underwritten public offering by the Company of an aggregate of 1,567,855 shares of the Company’s Common Stock (including
204,500 shares sold pursuant to the over-allotment option), at a price to the public of $7.50 per share.  The net proceeds
to the Company, after deducting the underwriting discount and other offering expenses payable by the Company, from the sale of
the shares in the offering were approximately $10,626,000.  On March 1, 2013, the Company used a portion of the net proceeds
of the offering to pay off the $3,113,366 balance under the note issued to Montaur in connection with the $20 million non-revolving
draw credit facility (see Note 5).</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><b><i>December 2013 Financing</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">On December 10,
2013, in connection with a licensing transaction, the Company entered into (i) a Securities Purchase Agreement with Platinum Partners
Value Arbitrage Fund L.P. (“Platinum Value”) and Platinum Partners Liquid Opportunity Master Fund L.P. (“Platinum
Liquid”, and together with Platinum Value, the “Platinum Partners”) (the “Platinum Securities Purchase
Agreement”) and (ii) a Securities Purchase Agreement with MTIA and Beijing Sino Tau Shang Pin Tech and Development Corp.
(“MTIA Affiliate”, and together with MTIA, the “China Purchasers”) (the “MTIA Securities Purchase
Agreement”, and together with the Platinum Securities Purchase Agreement, the “Securities Purchase Agreements”).</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Pursuant to
the Platinum Securities Purchase Agreement, the Platinum Partners purchased an aggregate of 1,818,182 of the Company’s
Capital Stock.  Of that total, Platinum Partners purchased 69,569 shares of the Company’s Common Stock at
$2.75 per share, being a premium to the NASDAQ closing price of $2.71 per share on December 9, 2013.  In addition,
the Platinum Partners purchased a total of 1,748,613 shares of Series E Preferred Stock (“Preferred Stock”) at a
purchase price of $2.75 per share, which, under certain conditions, are exchangeable into shares of the Company’s Common
Stock on a one-for-one basis.  The conversion of Preferred Stock into shares of Common Stock, however, is subject
to a restriction, which prohibits the conversion of shares of Preferred Stock if the number of shares of Common Stock to be
issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by the Platinum
Partners and their affiliates at such time, the number of shares of Common Stock which would result in Platinum Partners and
their affiliates beneficially owning in excess of 19.99% of all of the Company’s Common Stock outstanding at such
time.  Under the terms of the Platinum Securities Purchase Agreement, the Platinum Partners also received 181,818
warrants, having a five-year term and an exercise price of $2.75 per Warrant.  The warrants are exercisable six
months and one day following the issuance date thereof.  Under the terms of the Platinum Securities Purchase
Agreement, the Company has, at the request of the Platinum Partners, agreed to prepare a Proxy Statement and seek stockholder
approval of the issuance of the Common Stock underlying the Preferred Stock (see Note 15).  The Company received gross
proceeds of $5,000,000 from the sale of the securities to the Platinum Partners on December 10, 2013 and incurred issuance
costs of $100,000.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"><font style="background-color: white">In
connection with the issuance of this Series E Preferred Stock, the conversion feature of Series E Stock was considered beneficial,
or “in the money”, at issuance due to a conversion rate that allows the investor to obtain the Common Stock at below
market price.  The Company recorded a deemed dividend on the beneficial conversion feature equal to its relative fair
value resulting from the offering of $371,140 in the fourth quarter of the year ended December 31, 2013.</font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">Under the
MTIA Securities Purchase Agreement, the China Purchasers agreed to purchase a total of 1,818,182 shares of the Company’s
Common Stock at $2.75 per share along with 181,818 warrants, having a five-year term and an exercise price of $2.75 and
exercisable six months and one day following the issue date.  As of September 30, 2014, the Company had not
received the full proceeds of the sale of the securities from the MTIA after the parties had extended the due date for the
receipt of all such proceeds to March 27, 2014, from the original closing date of December 12, 2013.  MTIA failed
to provide funds in a timely manner, resulting in its material breach of the SPA, which has subsequently
expired.  Due to the fact that the Company has not received the full proceeds from MTIA under the SPA, the Company
has not issued all of the shares which it anticipated issuing under the MITA Securities Purchase nor has it recorded the
complete MTIA transaction.  In addition, the Company has not transferred any information related to license,
development or commercialization of Symphony to MTIA since, pursuant to the license agreement between the Company and MTIA,
the Company is not obligated to transfer technology unless and until MTIA fulfills its funding obligations under the MTIA
Securities Purchase Agreement.  The Company met with representatives of MTIA on October 22 and 23, 2014, regarding
a MTIA’s possible investment in the Company.  At the conclusion of the meeting, MTIA proposed an offer with an
approximate 24 hour lifespan that upon execution of a convertible note purchase agreement with a first stage financing amount
of $1,500,000, Echo would be required to turn-over all relevant technical product information and samples of our Generation 1
Symphony product to MTIA as well as dedicate personnel to support their consumer based business plan.  As the
MTIA offer did not include the previously agreed purchase of the additional $2,600,000 in Company securities as a
prerequisite for the release and support of technical product information, the Company deemed the offer inadequate to warrant
a response.   On October 24, 2014, the Managing Director of MTIA communicated to PwC that they “have no
intention to provide any so-called better offer”.  Accordingly, the Company has ceasedpursuing funding from
MTIA.  Through September 30, 2014, the Company has issued 872,728 shares of Common Stock and warrants to purchase
87,274 shares of Common Stock in exchange for $2,400,000 in gross proceeds, of which the last installment was paid to the
Company on April 15, 2014.  The Company incurred issuance costs of $50,000.  The fair value of warrants
issued to MTIA to purchase 87,274 shares of Common Stock was determined to be $174,396 and was recorded as a debit and a
credit to Additional Paid in Capital in the second quarter of 2014.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b><i>Stock Issued in Exchange for Services</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in">During the three
months ended September 30, 2014 and 2013, the Company did not issue shares of Common Stock to vendors in exchange for their services.  During
the nine months ended September 30, 2014 and 2013, the Company issued 2,636 and 7,450 shares, respectively, of Common Stock with
a fair value of $8,404 and $89,970, respectively, to vendors in exchange for their services.  The Company recorded expense
related to these issuances, which represents the fair value of the related stock at the time of issuance, to Selling, General and
Administrative expense.</p>
726000
242000
Echo Therapeutics, Inc. (the "Company") is filing this Amendment No. 1 (this "Amendment") to its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2014 (the "Form 10-Q") to make the following changes: Revising disclosure regarding corporate counsel withdrawal in (i) Note 15 to the Consolidated Financial Statements for the Three and Nine Months ended September 30, 2014, (ii) "Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Business - Recent Developments - Corporate Counsel Withdrawals from Engagement", and (iii) "Part I - Item 3. Disclosure Controls and Procedures - Disclosure Controls and Procedures - Corporate Counsel Withdrawals from Engagement"; Revising disclosure in "Part I - Item 2. Management's DIscussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Comparison of the Three Months ended September 30, 2014 and 2013" to add interest income and interest expenses disclosure; Revising disclosure in "Part I - Item 4. Disclosure Controls and Procedures - Internal Control over Financial Reporting"; Revising the caption of "Part II - Item 1. Legal Proceedings" to correct a typographical error.
Included in Gain (Loss) on Revaluation of Derivative Warrant Liability in the Consolidated Statement of Operations.