Note 2

Liquidity and Going Concern

Equity Financing and Change in Executive Leadership

On March 30, 2018, the Company entered into multiple agreements in order to obtain $17,000 of equity financing from the following sources:

	•	On March 30, 2018 we entered into a Stock Purchase Agreement (the "Accelmed SPA") and a Registration Rights Agreement with Accelmed Growth Partners L.P. ("Accelmed") investing $13,000 into the Company at a price per share of $1.08; upon closing Accelmed will receive 12,037,037 shares of our common stock.
	•	In connection with the proposed Accelmed investment, we entered into two separate stock purchase agreements on March 30, 2018, each for approximately $1,000 with our current shareholders, Broadfin Capital ("Broadfin") and Sabby Management ("Sabby"). Upon closing of these transactions, each of Sabby and Broadfin will receive 925,926 shares of our common stock at a price per share of $1.08.
	•	Two separate subscription agreements were also executed on March 30, 2018 in connection with the Accelmed investment: (i) a subscription agreement with Gohan Investments, Ltd. for $1,000 to purchase 925,926 shares of our common stock at $1.08 per share; and (ii) a subscription agreement with Dr. Dolev Rafaeli for $1,000 to purchase 925,926 shares of our common stock at $1.08 per share.

The Company may incur additional expenses, or Accelmed may receive additional shares in the event of certain contingencies. The Company is required to reimburse Accelmed for its legal, consulting, due diligence and administrative costs related to the proposed stock purchase, including the reasonable legal fees, disbursements and related charges of Accelmed's counsel in an aggregate amount not to exceed $400 (or up to $500 in the event of certain contingencies, and subject to no cap in the event the Company's stockholders do not approve the transaction) at the earliest of (i) the closing, or (ii) the termination of Accelmed SPA for any reason other than by reason of a breach of the Accelmed SPA by Accelmed. The Company may also be obligated to pay a breakup fee of $600 in the event the Company's board of directors makes a recommendation against the approval of the transaction. The Accelmed SPA also requires that the Company indemnify Accelmed for certain items as defined in SPA.

In connection with the Accelmed investment, the Company has agreed to pay a fee equal to 4% of the amount paid at closing to HC Wainwright, the Company's placement agent. This fee is in addition to the fees that will be owed to Fairmount Partners, the Company's financial advisor. Upon the closing of the Accelmed transaction, the Company is obligated to pay Fairmount Partners a fee of $692 of which $100 has been paid as a retainer, leaving a balance to be paid at closing of $592. In the event the Company becomes obligated to pay additional investment advisors fees, the Company is obligated to indemnify Accelmed for the additional payment.

The Company incurred $844 of costs related to the equity financing during the three months ended March 31, 2018. These costs were capitalized and are presented within Prepaid Expenses and Other Current Assets on the Condensed Consolidated Balance Sheet as of March 31, 2018. Upon the closing of the transaction, these costs will be reclassified from other current assets to stockholders' equity as an offset to the proceeds from the transaction.

In further consideration of entering into their respective stock purchase agreements, Sabby and Broadfin have each entered into separate agreements restricting their abilities to sell their holdings (the "Leak-Out Agreements"). Under the terms of each of the respective Leak-Out Agreements, the stockholder has agreed that from the later of (a) the date that the approval by the shareholders of the transactions is deemed effective and (b) the closing of the transactions contemplated pursuant to the SPA, the stockholder shall not sell dispose or otherwise transfer, directly or indirectly, (including, without limitation, any sales, short sales, swaps or any derivative transactions that would be equivalent to any sales or short positions) any shares of Common Stock of the Company held by the Stockholder on the date hereof or issuable to the Stockholder upon conversion of shares of the Company's Preferred Stock held by the Stockholder on the date hereof, (a) if prior to April 1, 2019, at a price per Company Share less than $1.296, subject to adjustment for reverse and forward stock splits and the like, or (b) thereafter, at a price per share reflecting less than the price set forth on the schedule in the Leak-Out Agreements subject to adjustment for reverse and forward stock splits and the like, unless, (1) in the case of either clauses (a) or (b), otherwise approved by the Company's Board of Directors, (2) in the case of clause (b), under a shelf prospectus or such other controlled offering as may be agreed to by the Principal Stockholders (as defined in the Stock Purchase Agreement) or (3) in the case of either clauses (a) or (b), in a sale pursuant to which any other stockholder(s) of the Company are offered the same terms of sale, including in a merger, consolidation, transfer or conversion involving the Company or any of its subsidiaries.

Pursuant to the Accelmed SPA, on April 10, 2018, we had a change in administration by which Dr. Dolev Rafaeli became Interim Chief Executive Officer and Frank J. McCaney, our former CEO, became Interim Chief Financial Officer. Additionally, effective after the closing of the investment at least five of the current board members will resign. Accelmed shall have the right to fill all the remaining vacancies effective as of the closing of the investment.

The transaction is subject to shareholder approval. Sabby and Broadfin have delivered to the Company a voting undertaking obligating Sabby and Broadfin to (a) increase their respective "blocker" to 9.99% prior to the record date for the meeting of the shareholders, and (b) vote all their voting shares in the Company at the meeting to approve the proposed transaction.

The Company intends to schedule a special meeting of the shareholders as soon as practicable and within the time limits set forth in the Accelmed SPA. The meeting is currently scheduled for May 23, 2018.

MidCap Non-binding Letter of Intent

In connection with the proposed investment led by Accelmed described above, we entered into a non-binding letter of intent dated March 30, 2018 with MidCap to terminate the existing MidCap loan agreement and replace it with a new agreement. This new agreement is contingent upon our raising $14,000 in new equity financing and the repayment of $3,000 on the current facility. Under the new agreement among other terms, the base amount of the loan is to be $7,571; the term is for 48 months; interest only payments for the first 18 months; and straight-line principal payments for the remaining 30 months. This loan will be collateralized by substantially all the assets of the Company and will contain certain financial and non-financial covenants.

Liquidity

As of March 31, 2018, the Company had an accumulated deficit of $231,863 and had been incurring losses since inception as well as negative cash flows from operations until 2016. To date, the Company has dedicated most of its financial resources to research and development, sales and marketing, and general and administrative expenses.

While management believes that its current cash and cash equivalents as of March 31, 2018, combined with the anticipated revenues from the sale of the Company's products will be sufficient to satisfy its working capital needs, and capital asset purchases, for the next 12 months following the filing of this form 10-Q, there is a risk associated with the Company's ability to meet its debt obligations should the Company breach its debt covenants. The current MidCap agreement has financial covenants including a minimum monthly net revenue covenant. If the Company fails to meet the revenue covenant, it may be declared in breach of the credit facility agreement, and MidCap would have the option to call the full debt balance outstanding under the credit facility agreement, which was $10,279 as of March 31, 2018. The Company has 30 days to report a default and upon notice from MidCap of a financial covenant breach, the Company has an additional 10 business days to cure such default. The Company, however, cannot be certain that this default will be cured in such period or at all.

The equity financings described in this footnote are subject to shareholder approval. Therefore, there is uncertainty whether the Company will close on the equity purchase and subscription agreements as well as the MidCap non-binding letter of intent.While there is no guarantee of shareholder approval, management is confident that shareholders will reach both a quorum and a positive vote since Sabby and Broadfin, per the voting agreement described above, have proposed to increase their respective blockers to a combined 19.99% of the vote.