12.

Subsequent event:

Midcap:

On July 5, 2013, the Company, Arius One and Arius Two (the “Borrowers”) entered into a $20 million secured loan facility (the “Loan Transaction” and such loan, the “Loan”) with MidCap as agent and lender pursuant to the terms and conditions of the Credit Agreement. The Company received net proceeds in the aggregate amount of $19.9 million and will use the Loan proceeds for general corporate purposes or other activities of the Borrower permitted under the Credit Agreement.

In addition, pursuant to the Loan Transaction, the Company issued to MidCap a warrant (the “MidCap Warrant”) to purchase 357,356 unregistered shares of Common Stock, which warrant has an exercise price of $4.20 per share, the 20-day volume-weighted average share price of the Common Stock prior to the closing of the Loan. The MidCap Warrant is exercisable for a term of five (5) years and contains cashless exercise provisions and customary, stock-based anti-dilution protection provisions.

The Loan has a term of 36 months with interest only payments for the first 6 months. The interest rate is 8.45% plus a LIBOR floor of 0.5%. Upon execution of the Credit Agreement, the Company paid to MidCap a closing fee of 0.5% of the aggregate Loan amount. Upon repayment in full of the Loan, the Company is obligated to make a final payment fee equal to 3.5% of the aggregate Loan amount. In addition, the Company may prepay all or any portion of the Loan at any time subject to a prepayment premium of: (i) 5% of the Loan amount prepaid in the first year of the Loan and (ii) 3% of the Loan amount prepaid in each year thereafter. In addition, if the Company receives the second of two anticipated database lock milestone payments (the “Database Lock Payments”) from Endo in connection with the Endo Agreement, the Company may prepay 50% of the principal amount of the Loan then outstanding and, concurrently and at the Company’s election, either: (i) pay to MidCap a cash prepayment fee of 2% of the principal amount of the Loan and all obligations thereunder outstanding as of the date of prepayment or (ii) issue to MidCap a warrant (in a form substantially similar to the MidCap Warrant) to purchase shares of Common Stock equal to 2.0% of the prepayment amount, with the number of shares being calculated using the Black-Scholes pricing model.

The obligations of the Borrowers under the Credit Agreement are secured by a first priority lien in favor of MidCap on substantially all of the Borrowers’ existing and after-acquired assets, but excluding certain of the Borrowers’ intellectual property and general intangible assets of the Borrowers (but not any proceeds thereof). The obligations of the Company under the Loan Agreement are also secured by a first priority lien on the equity interests held by the Company in Arius One, Arius Two and BND. The Borrowers entered into customary pledge and intellectual property security agreements to evidence the security interest in favor of MidCap.

Under the Credit Agreement, the Borrowers are subject to affirmative covenants which are customary for financings of this type, including the obligations of the Borrowers to: (i) maintain good standing and governmental authorizations, (ii) provide certain information and notices to MidCap, (iii) deliver monthly and annual financial statements to MidCap, (iv) maintain insurance, (v) discharge all taxes, (vi) protect their intellectual property and (vii) generally protect the collateral granted to MidCap.

The Borrowers are also subject to negative covenants customary for financings of this type, including that they may not: (i) enter into a merger or consolidation or certain change of control events, (ii) incur liens on the collateral, (iii) incur additional indebtedness, (iii) dispose of any property, (iv) amend material agreements or organizational documents, (v) change their jurisdictions of organization or their organizational structures or types, (vi) declare or pay dividends (other than dividends payable solely in Common Stock), (vii) make certain investments or acquisitions, or (viii) enter into certain transactions with affiliates, in each case subject to certain exceptions provided for in the Credit Agreement, including exceptions that allow the Borrowers to acquire additional products and to enter into licenses and similar agreements provided certain conditions are met.

The Credit Agreement provides that events of default include: (i) failure to make payment of principal or interest on the Loan when required, (ii) failure to perform obligations under the Credit Agreement and related documents, (iii) defaults in other indebtedness and breaches of material agreements of the Borrowers, (iv) if any Borrower shall generally not pay its debts as such debts become due and similar insolvency matters, (v) material adverse changes to the Borrowers (subject to a 10-day notice and cure period), (vi) if the Company ceases to be a publicly-listed and reporting company, (vii) failure to receive the Database Lock Payments by June 30, 2014, and (viii) certain other events, including certain adverse actions taken by the Food and Drug Administration or other governmental authorities. Upon an event of default, the Borrower’s obligations under the Credit Agreement may, or in the event of insolvency or bankruptcy will automatically, be accelerated. Upon the occurrence of any event of default, the Borrower’s obligations under the Credit Agreement will bear interest at a rate equal to the lesser of: (i) 4% above the rate of interest applicable to such obligations immediately prior to the occurrence of the event of default and (ii) the maximum rate allowable under law.

TTY Biopharm:

On July 29, 2013, the Company announced the regulatory approval of ONSOLIS^® in Taiwan for the management of breakthrough cancer pain in opioid tolerant, adult patients with cancer.

In Taiwan, the Company has licensed the commercialization rights to TTY, where the product will be marketed under the brand name PAINKYL™. TTY will be responsible for the cost of future product commercialization in Taiwan and expects to launch PAINKYL™ following receipt of reimbursement pricing from the Taiwanese national healthcare system. The approval in Taiwan results in a milestone payment of $0.3 million to the Company, which is expected to be received in the third quarter 2013. Upon launch, the Company will receive a royalty on net sales.