1. Organization and Description of the Business

We are a clinical-stage biopharmaceutical company focused on discovering and developing novel small molecule therapeutics in oncology, infectious diseases and autoimmune diseases. We currently have two clinical-stage product candidates in development: birinapant and suberohydroxamic acid 4-methoxycarbonyl phenyl ester (SHAPE). Our operations to date have been directed primarily toward developing business strategies, raising capital, research and development activities, conducting pre-clinical testing and human clinical trials of our product candidates and recruiting personnel.

Recent Events

On November 2, 2016, TetraLogic Pharmaceuticals Corporation (the “Company” or “TetraLogic”) and its wholly-owned subsidiary TetraLogic Research and Development Corporation (“TRDC”) entered into a definitive asset purchase agreement (the “APA”) to, subject to closing conditions, sell substantially all of their respective assets (the “Asset Sale”) to Medivir AB, a publicly traded Swedish company (Nasdaq Stockholm: MVIR) (“Buyer” or “Medivir”).

We have agreed to sell substantially all of the assets of TetraLogic and TRDC to Medivir for a purchase price of (i) $12 million payable in cash at closing plus an amount equal to the aggregate expense payable to INC Research, LLC to complete the SHAPE CTCL Phase 2 ongoing clinical trial currently estimated to be $275,000 (the “Closing Payment”), plus (ii) milestone payments based on the development and commercialization of our product candidates by Buyer and earn-out payments based on annual net sales of birinapant (the “Contingent Payments”). Buyer will also assume certain assumed liabilities (as defined in the APA) at the closing of the Asset Sale, including assuming contingent consideration liabilities due to the former owners of Shape Pharmaceuticals, Inc.

Following the closing of the Asset Sale, the Company may earn additional milestone payments of up to $153 million based on the development and commercialization of our product candidates, subject to certain conditions and limitations described below and in the APA. In addition, subject to the terms and conditions in the APA, the Company may receive earn-out payments based on net sales of any product containing birinapant as follows:

the Company will be entitled to 5% of annual net sales from $0 to $500,000,000;

the Company will be entitled to 7.5% of annual net sales from $500,000,000 to $1,000,000,000; and

the Company will be entitled to 10% of annual net sales above $1,000,000,000.

Buyer will acquire from TetraLogic and TRDC substantially all of their assets relating to the research, development, manufacture and commercialization of SMAC mimetics and HDAC inhibitors, including birinapant and SHP-141 (the “Business”), including (a) a specified list of contracts, (b) all inventory, supplies, materials and spare parts of TetraLogic and TRDC as of the closing of the Asset Sale, (c) 100% of the equity of their wholly-owned subsidiaries, TetraLogic Birinapant UK Ltd. and TetraLogic Shape UK Ltd., and (d) all intellectual property rights owned by TetraLogic and TRDC as of the closing of the Asset Sale. Specifically excluded from the Asset Sale and retained by TetraLogic and TRDC are other assets and liabilities of TetraLogic and TRDC identified in the APA, consisting primarily of cash on hand and certain prepaid assets and accrued liabilities related to the wind down of the business.

Completion of the Asset Sale requires the approval of our stockholders and holders of our outstanding 8% Convertible 8% Notes due 2019 (the “8% Notes”), the consent of certain third parties as well as the satisfaction or waiver of other customary conditions set forth in the APA.

The Company had approximately $43.7 million in aggregate principal amount of 8% Notes due 2019 outstanding as of November 2, 2016. In connection with the Asset Sale to Medivir, described above, on November 2, 2016, TetraLogic entered into a binding agreement (“Note Exchange Agreement”) with 100% of the holders of the 8% Notes pursuant to which the holders of 8% Notes agreed to exchange $2.2 million in aggregate principal amount of the 8% Notes for 12,222,222 newly-issued shares of TetraLogic convertible participating series A preferred stock. The exchange is expected to be consummated prior to November 14, 2016. Following the exchange, $41,550,000 in aggregate principal amount of our 8% Notes plus accrued but unpaid interest on all 8% Notes will remain outstanding. The Company has agreed that, upon consummation of the Asset Sale to Medivir, $12 million will be promptly distributed in cash to the holders of the 8% Notes remaining outstanding in partial redemption of $12 million in aggregate principal amount of such remaining 8% Notes and in priority to any payments to holders of capital stock. The holders of the 8% Notes have waived any put right in connection with a suspension of trading and delisting of the Company’s Common Stock from The Nasdaq Global Market as well as any right to receive current cash payment of the interest on the 8% Notes, and agreed instead that such interest will continue to accrue until paid off by the Company. The holders of the 8% Notes have also agreed to extend the maturity date of the remaining 8% Notes to June 15, 2024. These waivers and extensions are conditional on the consummation of the Asset Sale. If the Asset Sale is not consummated or if the APA is terminated, such waivers and extension will be of no further force and effect as if they had never been provided.

As a result of the transactions noted above, we will be terminating all remaining employees, with all terminations expected to be completed no later than December 2, 2016.

On October 18, 2016, TetraLogic received notice that the Nasdaq Hearings Panel (the “Panel”) had granted the Company’s request for an extension of the previously granted exception for continued listing on The Nasdaq Global Market. As previously reported in TetraLogic’s Current Report on Form 8-K filed on September 6, 2016, the Panel had granted the Company’s request for continued listing on The Nasdaq Global Market subject to certain conditions, including completion of a conversion of its outstanding 8% Notes into equity of the Company by October 15, 2016 (the “Restructuring”). On October 15, 2016, the Company informed the Panel that it had not yet completed the Restructuring, and subsequently on October 17, 2016, the Company requested that the Panel extend the exception deadline from October 15, 2016 to October 31, 2016 to complete the process of identifying the remaining holders of the 8% Notes and obtaining agreements for conversion of the 8% Notes.

On October 18, 2016, the Panel granted the Company’s request to extend the exception deadline through the end of the month. The Panel noted that the remaining exception deadlines, reported on Company’s Form 8-K filed on September 6, 2016, are still in place.

On November 2, 2016, the Company received a notice from Nasdaq that it determined to delist our common stock and that it will suspend trading of our common stock effective at the open of business on November 4, 2016. As a result of the execution of the APA and agreement with the holders of the 8% Notes as described above, the Company notified Nasdaq on November 2, 2016 of its intent to request delisting from the Nasdaq Global Market. Delisting will be effective 10 days after the filing of a Form 25 with the SEC.