Convertible Debt

September

27,

2016,

the Company issued and sold convertible promissory notes

(“2016

Convertible Notes”) in an aggregate principal amount of

$1.9

million. The

2016

Convertible Notes were issued to an investor and certain other parties in connection with the settlement of a litigation matter (See Note

10).

The

2016

Convertible Notes have a term of

one

(1)

year and bear interest at a rate of

6.0%

per annum with the principal and accrued interest due upon the earlier of the maturity date or conversion date. At any time prior to the maturity date, the holders

may

elect to convert, in whole or in part, the

2016

Convertible Notes (including any accrued but unpaid interest) into shares of the Company’s common stock at a conversion price of

$3.50

per share. In the event of a Change of Control (as defined in the

2016

Convertible Notes), the holders of the

2016

Convertible Notes

may

declare the aggregate outstanding amount of the

2016

Convertible Notes to be immediately due and payable or

may

elect to convert the

2016

Convertible Notes and any accrued but unpaid interest as if such conversion took place on the maturity date.

The Company accounted for the issuance of the convertible promissory notes in accordance with ASC

470

and, at the time of issuance, recorded a litigation settlement expense of

$2.5

million which represents the difference between the estimated fair value of the

2016

Convertible Notes issued and the cash received from the noteholders.

From

December

2009

through

December

2015,

the Company issued unsecured convertible promissory notes (the “Old Convertible Notes”) for aggregate gross proceeds of

$22.4

million. The Old Convertible Notes bore interest at either

1.5%

per annum, however, all Old Convertible Notes outstanding at

December

31,

2016

bear interest at a rate of

per annum. The Old Convertible Notes accrue interest beginning on the date of issuance, with the principal and accrued interest due upon the earlier of the maturity date or conversion date. At any time prior to the maturity date, the holders

may

elect to convert, in whole or in part, the Old Convertible Notes and any related accrued but unpaid interest into common stock of the Company at a price per share equal to the conversion price.

In the event of a Change of Control or a Qualified Financing (each as defined below), the holders of the Old Convertible Notes

may

declare the aggregate outstanding amount of the Old Convertible Notes to be immediately due and payable or

may

elect to convert the Convertible Notes and any accrued but unpaid interest as if such conversion took place on the maturity date. A Change of Control is defined as: (i) a merger or consolidation in which the owners immediately prior to the transaction do not own, directly or indirectly, more than

50%

of the surviving company; (ii) the acquisition of more than

50%

of the Company’s outstanding shares by a single person, entity or group or persons or entities acting in concert or (iii) the sale or transfer of all or substantially all of the assets of the Company. A Qualified Financing is defined as a sale of shares or other transaction that results in gross proceeds to the Company of at least

$50.0

million, including proceeds received in connection with the conversion of any Old Convertible Notes. Through the date the financial statements were available to be issued, there have been no Change of Control or Qualified Financing events.

The Company

may

prepay the Old Convertible Notes, in full or in part, at any time on a pari passu basis. Upon receipt of notice that the Company intends to prepay the Old Convertible Notes, holders will have the option to convert their notes in lieu of payment.

At the effective time of the Merger,

$1.1

million in aggregate principal amount of Old Convertible Notes were outstanding and

the rights of the holders of each such outstanding Old Convertible Note convertible into Diffusion Units were converted into the right to convert such securities into a number of shares of the Company’s common stock equal to the number of Diffusion Units such Old Convertible Note would be convertible into pursuant to its terms multiplied by the Exchange Ratio.

The following table provides the details of the Convertible Notes outstanding at

December

31,

2016:

Convertible Note Series	Issue Date	Maturity Date	Conversion Price		Interest Rate			Total Principal
2016 Convertible Notes	9/27/2016	9/27/2017	$	3.50		6.00	%	$	1,880,000

Series B Note	3/15/2011	6/30/2018	$	2.74		1.00	%		550,000

Total principal amount									2,430,000

Less current portion of convertible notes									(1,880,000	)

Convertible notes, net of current portion								$	550,000

During the year ended

December

31,

2016,

Old Convertible Notes of

$0.7

million and related accrued interest of

$16.4

thousand were converted into

217,122

shares of common stock:

The following table provides the details of the Convertible Notes outstanding at

December

31,

2015:

Convertible Note Series	Issue Date	Maturity Date	Conversion Price		Interest Rate			Total Principal
B	3/15/2011	6/30/2018	$	2.74		1.00	%		570,000

C	09/14/12	6/30/2018	$	2.74		1.00	%		425,000

E	06/30/2014	06/30/2018	$	4.11		1.00	%		50,000

F	12/04/2015	12/04/2019	$	5.48		1.00	%		200,000

Total principal amount									1,245,000

Less: unamortized debt issuance costs									(1,390	)

Less current portion of convertible notes									(424,964	)

Convertible notes, net of current portion								$	818,646

During the year ended

December

31,

2015,

Old Convertible Notes of

$19.1

million and related accrued interest of

$0.6

million were converted into

5,891,574

shares of common stock: