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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" align="center" style="font: 10pt Times New Roman, Times, Serif; width: 79%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1pt solid; text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif"><b>Subsidiary
Name</b></font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Origination/</b></font><font style="font-size: 8pt"><br />
<font style="font-family: Times New Roman, Times, Serif"><b>Acquisition Date</b></font></font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Ownership
Percentage</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 45%; text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">V-Clip Pharmaceuticals,
Inc.</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 15%; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">2008</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 15%; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">100%</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">Carcinotek, Inc.</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">2008</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">100%</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">White Label Generics, Inc.</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">2008</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">49%</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">MetaCytolytics, Inc.</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">2009</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">100%</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">VG Energy, Inc.</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">2010</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">81.65%</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">  </font></p>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">VG Life Sciences
Inc. (the “Company” or “VGLS”), formerly Viral Genetics, Inc., was incorporated in California on July
11, 1995. The Company is engaged in research and development of therapeutic and diagnostic pharmaceutical and medical products.
The Company was acquired by a publically traded Delaware Corporation and became a reporting issuer on October 1, 2001. On November
5, 2001, the publically traded company changed its name to Viral Genetics, Inc. The Company terminated registration with the SEC
on March 24, 2009. On November 26, 2012, the Company’s name was changed to VG Life Sciences Inc. The Company became a reporting
issuer again on October 14, 2014.The Company’s fiscal year-end is December 31.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">As of March
31, 2015, the Company has the following subsidiaries:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" align="center" style="font: 10pt Times New Roman, Times, Serif; width: 79%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1pt solid; text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif"><b> Subsidiary
Name</b></font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Origination/</b></font><font style="font-size: 8pt"><br />
<font style="font-family: Times New Roman, Times, Serif"><b>Acquisition Date</b></font></font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Ownership
Percentage</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 45%; text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">V-Clip Pharmaceuticals,
Inc.</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 15%; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">2008</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 15%; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">100%</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">Carcinotek, Inc.</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">2008</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">100%</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">White Label Generics, Inc.</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">2008</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">49%</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">MetaCytolytics, Inc.</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">2009</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">100%</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">VG Energy, Inc.</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">2010</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">81.65%</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">The various
subsidiaries were organized or acquired to facilitate the use of the Company’s Targeted Peptide Technology (“TPT”)
and Metabolic Disruption Technology, (“MDT”). As of March 31, 2015 all subsidiaries were inactive.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"><b></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">Effective
on March 15, 2015, the Company and KED Consulting Group LLC (“KED”) entered into a Convertible Promissory Note and
Warrant Purchase Agreement pursuant to which KED agreed to a twelve monthly payments of $50,000 commencing on March 15, 2015 in
the aggregate amount of $600,000. The note matures March 15, 2016, and has an interest rate of 8% per annum. Principal and accrued
interest are convertible at the option of KED in four equal tranches on June 15, 2015, September 15, 2015, December 15, 2015 and
March 15, 2016 at a conversion price 10% lower than the lowest three day average closing prices of the Company’s common
stock starting on January 12, 2015 and ending on February 11, 2015 ($0.0582). Any amount remaining outstanding upon maturity will
automatically be converted into common shares at the conversion price. The Company also issued on March 15, 2015 warrants to purchase
four common shares for each $1 of principal at $0.45 per share (2,400,000), exercisable on any date from the four-year anniversary
to the five-year anniversary from the date of the agreement. These warrants have a cashless exercise feature. The agreement contains
a default provision, among others, which states that if KED is delinquent in any payment which is not cured within 10 days of
written or electronic notice to KED by the Company, than the Company may cancel the agreement. In that event KED would be entitled
to retain that number of warrants associated with payments made prior to the default.  Through May 15, 2015, the Company
has received $100,000 from KED.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"><b></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">On April
13, 2015, the Company entered into an unlimited, unsecured revolving line of credit (“RLOC”) with MedBridge Development
Company, LLC with a maturity date of April 15, 2018, which, when funded, shall accrue interest at a rate of 5% per annum, and
which permits all or any portion of the then outstanding principal to be exchanged for shares of the Company’s common stock
at the election of MDC. For each $1 of principal exchanged by MDC for the Company’s common stock, MDC will receive a number
of shares calculated by dividing the exchanged amount by the volume-weighted average closing price of our common stock for the
20 trading days immediately prior to the date MDC provides notice of the exchange to the Company. Any unpaid principal due at
the maturity date will automatically be exchanged for shares of the Company's common stock using the maturity date as the date
of notice. For each share of stock issued for conversion of debt owed under the line of credit, the Company shall issue MDC a
warrant to purchase a share of common stock for 100% of the price at which the debt under the revolving line of credit were converted.
Upon default, MDC is entitled to receive interest on the outstanding principal balance and any other advances and charges advanced
by MDC at a per annum rate of the lesser of 12% per annum or the maximum interest rate allowed by law. Through May 15, 2015, $75,000
has been funded through the RLOC.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">Effective
April 16, 2015, the Company entered into a Memorandum of Understanding (“MOU”) with Tg IT, Inc., dba “Anchor
Point IT-Solutions” (“Anchor Point”). The MOU extends the services and terms provided in the MOU dated February
1, 2014, in which Anchor Point provides IT services and support for $600 per month. The MOU is cancellable by either party on
30 days’ notice. Anchor Point is owned in part by two of the Company’s directors, David Odell and John Tynan.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">In the three
month periods ended March 31, 2015 and 2014, the Company granted 1,515,000 and 1,515,000, respectively, non-qualified stock options
under its 2013 Equity Incentive Plan to management and consultants. The fair value of these options was estimated using the Black-Scholes
Option Pricing Model with the following assumptions: risk free annual interest ranging from 1.94% to 2.73%; volatility ranging
from 127% to 131%; expected life of 5 years; and no expected dividends. The aggregate fair value of these options granted for
the three months ended March 31, 2015 of $91,548 was included in research and development in the amount of $9,064 and general
and administrative expense in the amount of $82,484.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">Effective
on January 2, 2015, the Board of Directors voted to amend the Company’s 2013 Equity Incentive Plan to increase the shares
reserved that may be issued under the plan to 18 million.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">In March
2013, the Company, Dr. M. Karen Newell Rogers, Ph.D. (“Dr. Newell,”) the Company’s Chief Scientist pursuant
to her consulting agreement, and Scott & White Healthcare entered into a two year Funding Agreement to reimburse the Company
for its sole sponsorship of the Phase I clinical trial research expenses it has or will incur during the term of the agreement,
conducted for the benefit of the Company’s licensed MDT and TPT technologies. The agreement can be cancelled by any party
to it on 30 days advance notice, but all parties would remain obligated for their performance through the date or any such termination.
This research is in part funded through grants and other non-Company funding provided to the lab of Dr. Newell from donated funds
received for this purpose by Scott & White Healthcare (a non-profit organization) (“S&W”). Among other obligations
under this agreement, the Company must (i) indemnify S&W and Dr. Newell from and against all liabilities, claims, losses and
damages they may incur arising from this agreement or any act or omission of the Company related to its sponsorship of the clinical
trial and (ii) procure and maintain certain commercial general, professional liability and clinical professional liability insurance
in the amount of $10 million for damages that may arise from the agreement or any act or omission by the Company related to the
Company’s sponsorship of the clinical trial. Payments by S&W are to total $410,852 plus an additional $63,000 on behalf
of Dr. Newell for past expenses of the Company related to the preparation and drafting of the study protocol. In the year ended
December 31, 2013, the Company received $403,578 in reimbursements from Scott & White Health Sciences Center at San Antonio
(including $63,000 on behalf of Dr. Newell). Through December 31, 2013, $267,927 has been paid to the University of Texas by the
Company and the remaining $135,650 is included in accrued expenses. Actual amounts determined upon completion will be recorded
at that time. Pursuant to the agreement, the Company has agreed to incur at least $100,000 of expenses associated with the clinical
trial during the term of this agreement.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">Effective
July 2013 and amended in September 2014, the Company entered into a Patent License Agreement (“Agreement”) with S&W
with respect to certain intellectual property and patents developed or co-developed by Dr. Newell for her employer, Texas A&M
University Hospital Science Center (“HSC”). HSC has previously granted S&W the exclusive right to market and license
these rights. Under the Agreement, S&W granted the Company an exclusive license under the patent rights and intellectual property
to make, have made, use and sell the licensed products worldwide and in all applications, to the end of the patent term. The U.S.
and International provisional patent rights include MHC Engagement and CLIP Modulation for the Treatment of Disease, CLIP Modulation
for the Treatment of Mucosal Diseases, Cancer Biomarkers, Therapeutics and Methods and Products For Treating Preeclampsia and
Modulating Blood Pressure, and Treating Neurological Diseases.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><font style="font-size: 8pt">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">The Company
was required to make an initial $50,000 payment to S&W, and was obligated to make royalty payments to S&W of 3% of net
sales in developed countries and 0.5% of net sales in underdeveloped countries, of licensed products or services requiring their
use, subject to adjustment as defined in the agreement. In consideration for Amendment 1 dated September 9, 2014, the Company
was required to make an additional payment of $25,000 to S&W. Additionally, in order to maintain the license, the Company
was required to pay S&W minimum annual consideration, in combination with the aforementioned royalties, as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" align="center" style="font: 10pt Times New Roman, Times, Serif; width: 63%; border-collapse: collapse">
<tr style="vertical-align: top; background-color: #EEEEEE">
<td style="width: 5%"><font style="font: 8pt Times New Roman, Times, Serif">(a)</font></td>
<td style="width: 45%"><font style="font: 8pt Times New Roman, Times, Serif">Calendar Year 2013, payable January 1, 2014</font></td>
<td style="width: 2%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">20,000</font></td></tr>
<tr style="vertical-align: top; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">(b)</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">Calendar Year 2014, payable January 1, 2015</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">20,000</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
<td><font style="font: 8pt Times New Roman, Times, Serif">(c)</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">Calendar Year 2015, payable January 1, 2016</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">87,500</font></td></tr>
<tr style="vertical-align: top; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">(d)</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">Calendar Year 2016, payable January 1, 2017</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">125,000</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
<td><font style="font: 8pt Times New Roman, Times, Serif">(e)</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">Calendar Year 2017, payable January 1, 2018</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">187,000</font></td></tr>
<tr style="vertical-align: top; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">(f)</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">Calendar Year 2018, payable January 1, 2019 and each January 1 year
thereafter through the expiration of the Agreement</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">250,000</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">In addition,
the Company was obligated for certain milestone payments –</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px"><font style="font-size: 8pt"> </font></td>
<td style="width: 24px"><font style="font: 8pt Symbol">·</font></td>
<td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">For each Phase I clinical trial - $100,000</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font: 8pt Symbol">·</font></td>
<td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">Upon successful conclusion of each Phase
III clinical trial or any other clinical trial following a Phase II clinical trial for each licensed product - $500,000</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font: 8pt Symbol">·</font></td>
<td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">Upon each regulatory/market approval
on each licensed product/indication - $2,000,000.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">The Company
was responsible for prosecution and maintenance of the patent rights after the effective date and would have been directly responsible
for such future expenses of filing and protection of patent claims, including counsel fees. The Agreement contained other obligations
for timely periodic reporting of its activities and other matters that are material to maintenance of the patent rights.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">The Company
is in compliance with these payment terms, except that the payment due January 1, 2015 has not been made, nor has the additional
$25,000 payment required in consideration of Amendment 1. As a result, the Company received notice of termination dated March
10, 2015, which resulted in termination under the original Agreement on May 9, 2015. S&W has the right under the Agreement
to charge daily interest on overdue payments commencing on the 31<sup>st</sup> day after the payment is due at the lower of either
one and a half percent per month or the highest legal interest rate. This right does not terminate upon the termination of the
Agreement.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">The Company
is currently engaged in negotiations with S&W to pay all amounts due, to cure the default, and to reinstate the terms of the
original agreement as amended. At this time, the negotiations have not resulted in any final agreement between the parties and
the agreement remains in default. In the event that the license cannot be reinstated, the Company will lose certain patent and
other intellectual property rights that will impair its current research and development activities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">On
March 28, 2014, as amended May 9, 2014, September 4, 2014 and February 5, 2015 the Company entered into an Investment Agreement
(“the Agreement”) with Dutchess Opportunity Fund II L.P. (“Dutchess”) whereby Dutchess may purchase up
to that number of common shares having an aggregate purchase price of $5,000,000. This agreement is referred to by the parties
as the Equity Line. Under terms of the Agreement, the Company may, at its sole discretion, deliver a Put Notice to Dutchess stating
the dollar amount of common shares, which the Company intends to sell to Dutchess on a closing date. The maximum amount that Dutchess
can be required to purchase at any one time shall be equal to (1) 200% of the average daily volume for the three trading days
immediately preceding the formal date of the notice to Dutchess or (2) $150,000, determined at the sole discretion of the Company.
The share purchase price is 94% of the lowest daily volume-weighted average price of Company stock for the 5 consecutive trading
days beginning with the notice date and the ensuing four trading days. The Agreement is for a term of three years from the date
of execution, or, if earlier, the sale of $5,000,000 or written notice to Dutchess by the Company. The Company and Dutchess amended
the original agreement to require the Company to file a Registration Statement on Form S-1 (or other appropriate form) with the
SEC covering 5 million common shares, the registrable securities that may be issued under the Investment Agreement within 30 days
of the completion of the review of the Form 10 by the SEC. The Company was notified by the SEC that the required registration
statement filed by the Company with respect to the registrable securities was declared effective on February 22, 2015.</font><font style="font-size: 8pt">
<font style="font-family: Times New Roman, Times, Serif">Pursuant to the Equity Line Agreement with Dutchess, on March 19, 2015,
the Company exercised its right to issue a Put Notice in the amount of $25,000. The pricing period ran from March 19, 2015 to
March 25, 2015 with a floor price of $0.06 per share. The per share purchase price was calculated as $0.0664 in the pricing period.
The Company received $5,713 in net proceeds of this put and issued 89,800 common shares on April 2, 2015.</font></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<table cellspacing="0" cellpadding="0" align="center" style="font: 10pt Times New Roman, Times, Serif; width: 63%; border-collapse: collapse">
<tr style="vertical-align: top; background-color: #EEEEEE">
<td style="width: 5%"><font style="font: 8pt Times New Roman, Times, Serif">(a)</font></td>
<td style="width: 45%"><font style="font: 8pt Times New Roman, Times, Serif">Calendar Year 2013, payable January 1, 2014</font></td>
<td style="width: 2%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">20,000</font></td></tr>
<tr style="vertical-align: top; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">(b)</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">Calendar Year 2014, payable January 1, 2015</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">20,000</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
<td><font style="font: 8pt Times New Roman, Times, Serif">(c)</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">Calendar Year 2015, payable January 1, 2016</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">87,500</font></td></tr>
<tr style="vertical-align: top; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">(d)</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">Calendar Year 2016, payable January 1, 2017</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">125,000</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
<td><font style="font: 8pt Times New Roman, Times, Serif">(e)</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">Calendar Year 2017, payable January 1, 2018</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">187,000</font></td></tr>
<tr style="vertical-align: top; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">(f)</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">Calendar Year 2018, payable January 1, 2019 and each January 1 year
thereafter through the expiration of the Agreement</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">250,000</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
671356
769775
722738
613675
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">The accompanying
unaudited interim consolidated financial statements as of March 31, 2015 and for the three month periods ended March 31, 2015
and 2014 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim
financial information and on the same basis as the audited annual consolidated financial statements. The unaudited interim consolidated
balance sheet as of March 31, 2015, unaudited interim consolidated statements of operations for the three month periods ended
March 31, 2015 and 2014, and the unaudited interim consolidated statements of cash flows for the three month periods ended March
31, 2015 and 2014 include all material adjustments, consisting only of normal recurring adjustments (unless otherwise discussed
below), which management considered necessary for a fair presentation of the financial position and operating results for the
periods presented. These unaudited financial statements are the representations of management. The results for the three month
period ended March 31, 2015 are not necessarily indicative of results to be expected for the year ending December 31, 2015
or for any future interim period. The audited consolidated balance sheet at December 31, 2014 has been derived from the audited
consolidated financial statements; however, the notes to the accompanying unaudited consolidated financial statements do not include
all of the information and notes required by accounting principles generally accepted in the United States of America for complete
consolidated financial statements. The accompanying unaudited consolidated interim financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto for the year ended December 31, 2014 included in the
Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on April 15, 2015. These accompanying
notes are generally limited to the information necessary to update the information included in the aforementioned financial statements
for the year ended December 31, 2014.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><u>Accounting
Pronouncements</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">The Company
adopted the provisions of FASB Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915) (“the Update”)
in these financial statements. The Update removes the definition of a development stage entity from the Master Glossary of the
Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities from
US GAAP. In addition, the Update eliminates the requirements for development stage entities to: (1) present inception-to-date
information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a
development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4)
disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the
development stage. For public business entities, the amendment is effective for annual reporting periods beginning after December
15, 2014. The requirements of this pronouncement do not have a material effect on the financial statements and the Company believes
they will not going forward.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><u>Going
Concern</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">As of March
31, 2015, the Company had an accumulated deficit of approximately $107.4 million and requires substantial additional funds to
continue its research and development, to support its operations and to achieve its business development goals, the attainment
of which are not assured. The Company has been able to satisfy certain liabilities with convertible indebtedness and common shares
and enter into debt settlement arrangements, facilitated by third party financing, with vendors and creditors for substantial
amounts of its various financial obligations. Convertible instruments have also been converted into equity. In March 2013 and
subsequently extended in January 2015, the Company also entered into arrangements with related parties under which it has and
will continue to receive certain financial and administrative support and services through December 31, 2015 and has consummated
related party and unrelated convertible debenture and warrant agreements from which it has and will receive cash and executive
services (from related parties only). On April 13, 2015, the Company entered into an unlimited, unsecured revolving line of credit
(“RLOC”) with MedBridge Development Company, LLC with a maturity date of April 15, 2018. However, substantial indebtedness
remains and substantial recurring losses from operations and additional liabilities continue to be incurred.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">These factors
and uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements
do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification
of liabilities that might incur in the event the Company cannot continue in existence. Management has designed plans for sales
of the Company’s future pharmaceutical related products. Management intends to seek additional capital from new equity securities
offerings, from debt financing and debt restructuring to provide funds needed to increase liquidity, fund internal growth and
fully implement its business plan. However, management can give no assurance that these funds will be available in adequate amounts,
or if available, on terms that would be satisfactory to the Company.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">The timing
and amount of the Company’s capital requirements will depend on a number of factors, including (i) the need for funds to
support research and development, (ii) payment requirements to sustain licensing rights, (iii) demand for new products and services,
(iv) the availability of opportunities for international expansion through affiliations, (v) maintaining its status as a public
company and supporting shareholder and investor relations, (vi) the need to establish and maintain current and new business relationships,
and (vii) for other general corporate business purposes. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><u>Accounting
Pronouncements</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">The Company
adopted the provisions of FASB Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915) (“the Update”)
in these financial statements. The Update removes the definition of a development stage entity from the Master Glossary of the
Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities from
US GAAP. In addition, the Update eliminates the requirements for development stage entities to: (1) present inception-to-date
information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a
development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4)
disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the
development stage. For public business entities, the amendment is effective for annual reporting periods beginning after December
15, 2014. The requirements of this pronouncement do not have a material effect on the financial statements and the Company believes
they will not going forward.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><u>Going
Concern</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">As of March
31, 2015, the Company had an accumulated deficit of approximately $107.4 million and requires substantial additional funds to
continue its research and development, to support its operations and to achieve its business development goals, the attainment
of which are not assured. The Company has been able to satisfy certain liabilities with convertible indebtedness and common shares
and enter into debt settlement arrangements, facilitated by third party financing, with vendors and creditors for substantial
amounts of its various financial obligations. Convertible instruments have also been converted into equity. In March 2013 and
subsequently extended in January 2015, the Company also entered into arrangements with related parties under which it has and
will continue to receive certain financial and administrative support and services through December 31, 2015 and has consummated
related party and unrelated convertible debenture and warrant agreements from which it has and will receive cash and executive
services (from related parties only). On April 13, 2015, the Company entered into an unlimited, unsecured revolving line of credit
(“RLOC”) with MedBridge Development Company, LLC with a maturity date of April 15, 2018. However, substantial indebtedness
remains and substantial recurring losses from operations and additional liabilities continue to be incurred.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">These factors
and uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements
do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification
of liabilities that might incur in the event the Company cannot continue in existence. Management has designed plans for sales
of the Company’s future pharmaceutical related products. Management intends to seek additional capital from new equity securities
offerings, from debt financing and debt restructuring to provide funds needed to increase liquidity, fund internal growth and
fully implement its business plan. However, management can give no assurance that these funds will be available in adequate amounts,
or if available, on terms that would be satisfactory to the Company.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">The timing
and amount of the Company’s capital requirements will depend on a number of factors, including (i) the need for funds to
support research and development, (ii) payment requirements to sustain licensing rights, (iii) demand for new products and services,
(iv) the availability of opportunities for international expansion through affiliations, (v) maintaining its status as a public
company and supporting shareholder and investor relations, (vi) the need to establish and maintain current and new business relationships,
and (vii) for other general corporate business purposes. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">Effective
March 18, 2013, the Company entered into a Strategic Collaboration Agreement (“SCA”), with MedBridge Development Company,
LLC (“MDC”), pursuant to which MDC provided funding and services to the Company to fund continuing research and development
and operations and provided administrative assistance, and a line of credit at the discretion of MDC aggregating $550,000 through
March 17, 2015. In the three months ended March 31, 2015, MDC advanced $140,000 and provided $50,968 in services to the Company.
At March 31, 2015, $0 remains to be received in monthly advances, and $0 is available on the line of credit and all services provided
in the SCA have been rendered.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">Effective
on January 12, 2015, the Company and MedBridge Venture Fund, LLC (“MVF”) entered into a Convertible Promissory Note
and Warrant Purchase Agreement pursuant to which MVF agreed to provide services as defined in the agreement in the amount of $862,500
during the period from January 12, 2015 to December 31, 2015. The services being provided by MVF include a management team comprised
of a President and CEO, Chief Financial Officer, Chief Operating Officer, Controller, corporate project manager, grant application
coordinator, finance administrative assistant and public relations resources. The note matures December 31, 2015, and has an interest
rate of 8% per annum. Principal and accrued interest are convertible at the option of MVF in four equal tranches on March 31,
2015, June 30, 2015, September 30, 2015 and December 31, 2015 at a conversion price 10% lower than the lowest three day average
closing prices of the Company’s common stock starting on January 12, 2015 and ending on February 11, 2015 ($0.0582). Any
amount remaining outstanding upon maturity will automatically be converted into common shares at the conversion price. The Company
also issued on January 12, 2015 warrants to purchase four common shares for each $1 of principal at $0.45 per share (3,450,000),
exercisable on any date from the four-year anniversary to the five-year anniversary from the date of the agreement. These warrants
have a cashless exercise feature. Through March 31, 2015, services valued at $187,500 have been provided for which the Company
has issued notes of an equal amount.</font></p>
140000
0
1515000
1515000
91548
9064
82484
18000000