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<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Basis of Presentation</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The unaudited condensed
consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial
statements and within the rules of the Securities and Exchange Commission (“SEC”) applicable to interim financial
statements and therefore do not include all disclosures that might normally be required for financial statements prepared in accordance
with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying unaudited
condensed consolidated financial statements have been prepared by management without audit and should be read in conjunction with
our consolidated financial statements, including the notes thereto, appearing in our Annual Report on Form 10-K for the year ended
December 31, 2016. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial
position, consolidated results of operations and consolidated cash flows, for the periods indicated, have been made. The results
of operations for the three months ended March 31, 2017 are not necessarily indicative of operating results that may be achieved
over the course of the full year. Historical financial statements have been reclassified to conform to the current period presentation,
principally reflecting the sale of Cold-EEZE<sup>®</sup> Business as discontinued operations.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Seasonality of the Business</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Our net sales are derived
principally from our OTC heath care and cold remedy products sold in the United States of America. Our sales are influenced by
and subject to fluctuations in the timing of purchase and the ultimate level of demand for our products which are a function of
the timing, length and severity of each cold season. Generally, a cold season is defined as the period of September to March when
the incidence of the common cold rises as a consequence of the change in weather and other factors. We generally experience in
the first, third and fourth quarter higher levels of net sales. Revenues are generally at their lowest levels in the second quarter
when customer demand generally declines.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 31.5pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 31.5pt">For the three months
ended March 31, 2017 and 2016, our net sales were principally related to domestic markets.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Use of Estimates</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The preparation of financial
statements and the accompanying notes thereto, in conformity with GAAP, requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the respective reporting periods. Examples include the provision
for bad debt, sales returns and allowances, inventory obsolescence, useful lives of property and equipment and intangible assets,
impairment of property and equipment and intangible assets, income tax valuations and assumptions related to accrued advertising.
When providing for the appropriate sales returns, allowances, cash discounts and cooperative incentive promotion costs (“Sales
Allowances”), we apply a uniform and consistent method for making certain assumptions for estimating these provisions. These
estimates and assumptions are based on historical experience, current trends and other factors that management believes to be relevant
at the time the financial statements are prepared. Management reviews the accounting policies, assumptions, estimates and judgments
on a quarterly basis. Actual results could differ from those estimates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Factors considered in estimating
the appropriate sales returns and allowances for the Cold-EEZE<sup>®</sup> cold remedy lozenge products include it being
(i) a unique product with limited competitors, (ii) competitively priced, (iii) promoted, (iv) unaffected for remaining shelf-life
as there is no product expiration date and (v) monitored for inventory levels at major customers and third-party consumption data.
In addition to Cold-EEZE<sup>®</sup> cold remedy lozenges, we have marketed and distributed a variety of Cold-EEZE<sup>®
</sup>cold remedy QuickMelts<sup>®</sup>, a Cold-EEZE<sup>® </sup>cold remedy Oral Spray, a Cold-EEZE<sup>® </sup>Natural
Allergy Relief caplets, a Cold-EEZE<sup>®</sup> Daytime and Nighttime Multi-Symptom Relief in a liquid form and our new Cold-EEZE<sup>®
</sup>Gummies Multi-Symptom Relief for Cold and Flu. We also manufacture, market and distribute an organic cough drop and a Vitamin
C supplement. Each of the Cold-EEZE<sup>®</sup> cold remedy Oral Spray, QuickMelts<sup>® </sup>and Gummies products,
Cold-EEZE<sup>®</sup> Natural Allergy Relief caplets, Cold-EEZE<sup>®</sup> liquid forms and organic lozenge products
carry shelf-life expiration dates for which we aggregate such new product market experience data and update our sales returns
and allowances estimates accordingly. Sales allowances estimates are tracked at the specific customer and product line levels
and are tested on an annual historical basis, and reviewed quarterly. Additionally, we monitor current developments by customer,
market conditions and any other occurrences that could affect the expected provisions relative to net sales for the period presented.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Cash Equivalents</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i> </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We consider all highly
liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents include
cash on hand and monies invested in money market funds. The carrying amount approximates the fair market value due to the short-term
maturity of these investments.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Inventory Valuation </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Inventory is valued at the
lower of cost, determined on a first-in, first-out basis (FIFO), or market. Inventory items are analyzed to determine cost and
the market value and appropriate valuation adjustments are established. At March 31, 2017 and December 31, 2016, the financial
statements include adjustments to reduce inventory for excess or obsolete inventory of $1.4 million and $1.6 million, respectively.
The components of inventory are as follows (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 36pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">March 31,</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">December 31,</font></td>
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<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
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<td style="width: 54%; padding-left: 1.5pt"><font style="font-size: 10pt">Raw materials</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,257</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,404</font></td>
<td style="width: 1%"> </td></tr>
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<td style="padding-left: 1.5pt"><font style="font-size: 10pt">Work in process</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">438</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">466</font></td>
<td> </td></tr>
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<td style="padding-bottom: 1.5pt; padding-left: 1.5pt"><font style="font-size: 10pt">Finished goods</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">460</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">866</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; padding-left: 1.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,155</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,736</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
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<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Property, Plant and Equipment</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Property, plant and equipment
are recorded at cost. We use the straight-line method in computing depreciation for financial reporting purposes. Depreciation
expense is computed in accordance with the following ranges of estimated asset lives: building and improvements – ten to
thirty-nine years; machinery and equipment – three to seven years; computer software – three years; and furniture
and fixtures – five years.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Concentration of Risks</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"><b><i> </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Future revenues, costs,
margins and profits will continue to be influenced by our ability to maintain our manufacturing availability and capacity together
with our marketing and distribution capabilities and the regulatory requirements associated with the development of OTC and other
personal care products in order to compete on a national level and/or international level.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Our business is subject
to federal and state laws and regulations adopted for the health and safety of users of our products. Our OTC health care products
are subject to regulations by various federal, state and local agencies, including the Food and Drug Administration (“FDA”)
and, as applicable, the Homeopathic Pharmacopoeia of the United States.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Financial instruments that
potentially subject us to significant concentrations of credit risk consist principally of cash investments and trade accounts
receivable.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We maintain cash and cash
equivalents with certain major financial institutions. As of March 31, 2017, our cash balance was $42.8 million and our bank balance
was $43.1 million. Of the total bank balance, $336,000 was covered by federal depository insurance and $42.8 million was uninsured
at March 31, 2017.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Trade accounts receivable
potentially subject us to credit concentrations from time-to-time as a consequence of the timing, payment pattern and ultimate
purchase volumes or shipping schedules with our customers. We extend credit to our customers based upon an evaluation of the customer’s
financial condition and credit history and generally we do not require collateral. Our broad range of customers includes many
large national chain, regional, specialty and local retail stores. These credit concentrations may impact our overall exposure
to credit risk, either positively or negatively, in that our customers may be similarly affected by changes in economic, regulatory
or other conditions that may impact the timing and collectability of amounts due to us. As a consequence of an evaluation of our
customer’s financial condition, payment patterns, balance due to us and other factors, we did not offset our account receivable
with an allowance for bad debt at March 31, 2017 and December 31, 2016.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Long-lived Assets</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We review our carrying value
of our long-lived assets with definite lives whenever events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable. When indicators of impairment exist, we determine whether the estimated undiscounted sum of the
future cash flows of such assets is less than their carrying amounts. If less, an impairment loss is recognized in the amount,
if any, by which the carrying amount of such assets exceeds their respective fair values. The determination of fair value is based
on quoted market prices in active markets, if available, or independent appraisals; sales price negotiations; or projected future
cash flows discounted at a rate determined by management to be commensurate with our business risk. The estimation of fair value
utilizing discounted forecasted cash flows includes significant judgments regarding assumptions of revenue, operating and marketing
costs; selling and administrative expenses; interest rates; property and equipment additions and retirements; industry competition;
and general economic and business conditions, among other factors.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Fair value is based on
the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. In order to increase consistency and comparability in fair value measurements, a three-tier fair value
hierarchy prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as observable inputs such as
quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly
or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring
an entity to develop its own assumptions.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Revenue Recognition</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 36pt"><b><i> </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Sales are recognized at
the time ownership is transferred to the customer. Revenue is reduced for trade promotions, estimated sales returns, cash discounts
and other allowances in the same period as the related sales are recorded. We make estimates of potential future product returns
and other allowances related to current period revenue. We analyze historical returns, current trends, and changes in customer
and consumer demand when evaluating the adequacy of the sales returns and other allowances.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Our return policy accommodates
returns for (i) discontinued products, (ii) store closings and (iii) products that have reached or exceeded their designated expiration
date. We do not impose a period of time within which product may be returned. All requests for product returns must be submitted
to us for pre-approval. The main components of our returns policy are: (i) we will accept returns that are due to damaged product
that is un-saleable and such return request activity falls within an acceptable range, (ii) we will accept returns for products
that have reached or exceeded designated expiration dates and (iii) we will accept returns in the event that we discontinue a product
provided that the customer will have the right to return only such items that it purchased directly from us. We will not accept
return requests pertaining to customer inventory “Overstocking” or “Resets”. We will only accept return
requests for product in its intended package configuration. We reserve the right to terminate shipment of product to customers
who have made unauthorized deductions contrary to our return policy or pursue other methods of reimbursement. We compensate the
customer for authorized returns by means of a credit applied to amounts owed or to be owed and in the case of discontinued product
only, also by way of an exchange. We do not have any significant product exchange history.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Pursuant to the terms of
the Asset Purchase Agreement, we are responsible for and continue to accept product returns of the Cold-EEZE<sup>® </sup>Business
for product shipped prior to March 30, 2017. Additionally, pursuant to the terms of the Asset Purchase Agreement, we allocated
and agreed to pay Mylan an aggregate of $400,000 for future sales returns and allowances arising from certain product returns that
were sold by us prior to March 30, 2017.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">As of March 31, 2017 and
December 31, 2016, we included a provision for sales allowances of $55,000 and $108,000, respectively. Additionally, accrued advertising
and other allowances as of March 31, 2017 included (i) $872,000 for estimated future sales returns and (ii) $828,000 for cooperative
incentive promotion costs. As of December 31, 2016, accrued advertising and other allowances included (i) $1.2 million for estimated
future sales returns and (ii) $1.5 million for cooperative incentive promotion costs.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Shipping and Handling </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Product sales carry shipping
and handling charges to the purchaser, included as part of the invoiced price, which is classified as revenue. In all cases, costs
related to this revenue are recorded in cost of sales.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Stock-Based Compensation</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We recognize all share-based
payments to employees and directors, including grants of stock options, as compensation expense in the financial statements based
on their fair values. Fair values of stock options are determined through the use of the Black-Scholes option pricing model. The
compensation cost is recognized as an expense over the requisite service period of the award, which usually coincides with the
vesting period.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Stock and stock options
for the purchase of our common stock, $0.0005 par value (“Common Stock”), have been granted to both employees and
non-employees pursuant to the terms of certain agreements and stock option plans (see Note 6). Stock options are exercisable during
a period determined by us, but in no event later than ten years from the date granted. For the three months ended March 31, 2017
and 2016, we charged to operations zero and $1,000, respectively, for share-based compensation expense for the aggregate fair
value of stock grants issued and vested stock options earned.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The components of inventory
are as follows (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 36pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">March 31,</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">December 31,</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%; padding-left: 1.5pt"><font style="font-size: 10pt">Raw materials</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,257</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,404</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 1.5pt"><font style="font-size: 10pt">Work in process</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">438</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">466</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 1.5pt"><font style="font-size: 10pt">Finished goods</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">460</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">866</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; padding-left: 1.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,155</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,736</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We have estimated future
minimum obligations over the next five years, including the remainder of Fiscal 2017, as follows (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 36pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Fiscal Year</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Employment</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Contracts</p></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 1%; text-align: center"> </td>
<td style="width: 48%; text-align: center"><font style="font-size: 10pt">2017</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 49%; text-align: right"><font style="font-size: 10pt">506</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center"> </td>
<td style="text-align: center"><font style="font-size: 10pt">2018</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">506</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: center"> </td>
<td style="text-align: center"><font style="font-size: 10pt">2019</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center"> </td>
<td style="text-align: center"><font style="font-size: 10pt">2020</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 10pt">2021</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: center"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">Total</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,012</font></td></tr>
</table>
<p style="margin: 0pt"></p>
0000868278
6840000
7624000
6873000
751000
2091000
1340000
751000
34000
38000
52000
47000
453000
500000
18123000
-17670000
43888000
-1336000
43888000
44639000
-751000
43268000
2500000
26349000
16919000
1365000
-30000
69000
69000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Fair Value of Financial Instruments </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"><b><i> </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Cash and cash equivalents,
accounts receivable, assets held for sale, accounts payable, accrued expenses and notes payable are reflected in the Condensed
Consolidated Financial Statements at carrying value which approximates fair value.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Advertising and Incentive Promotions</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Advertising and incentive
promotion costs are expensed within the period in which they are utilized. Advertising and incentive promotion expense is comprised
of (i) media advertising, presented as part of sales and marketing expense, (ii) cooperative incentive promotions and coupon program
expenses, which are accounted for as part of net sales, and (iii) free product, which is accounted for as part of cost of sales.
Advertising and incentive promotion expenses incurred (i) from continuing operations for the three months ended March 31, 2017
and 2016 were $32,000 and $199,000, respectively, and (ii) attributed to and classified as discontinued operations were $2.6 million
and $2.9 million, respectively. Included in prepaid expenses and other current assets was $27,000 and $263,000 at March 31, 2017
and December 31, 2016, respectively, relating to prepaid advertising and promotion expenses.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Research and Development</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Research and development
costs are charged to operations in the period incurred. Research and development costs incurred for the three months ended March
31, 2017 and 2016 (i) from continuing operations were $34,000 and $38,000, respectively, and (ii) attributed to and classified
as discontinued operations of $52,000 and $47,000, respectively. Research and development costs are principally related to personnel
expenses and new product development initiatives and costs associated with our OTC health care products.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Income Taxes</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We utilize the asset and
liability approach which requires the recognition of deferred tax assets and liabilities for the future tax consequences of events
that have been recognized in our financial statements or tax returns. In estimating future tax consequences, we generally consider
all expected future events other than enactments of changes in the tax law or rates. Until we have sufficient taxable income to
offset the temporary timing differences attributable to operations and the tax deductions attributable to option, warrant and stock
activities are assured, a valuation allowance equaling the total deferred tax asset is being provided (see Notes 4 and 7).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We utilize a two-step approach
to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining
if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount
which is more than fifty percent likely of being realized upon ultimate settlement. Any interest or penalties related to income
taxes will be recorded as interest or administrative expense, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">As a result of our continuing
tax losses, we have recorded a full valuation allowance against a net deferred tax asset. Additionally, we have not recorded a
liability for unrecognized tax benefits.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Recently Issued Accounting Standards</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In May 2014, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue
from Contracts with Customers”, on revenue recognition. The new standard provides for a single five-step model to be applied
to all revenue contracts with customers as well as requires additional financial statement disclosures that will enable users to
understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. Companies have
an option to use either a retrospective approach or cumulative effect adjustment approach to implement the standard. This ASU,
as amended, is effective for fiscal years and interim periods within those years beginning after December 15, 2017. We are currently
assessing the impact of this update, but preliminarily believe that its adoption will not have a material impact on our consolidated
financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In July 2015, the FASB issued
ASU No. 2015-11 “Simplifying the Measurement of Inventory” which requires an entity to measure inventory balances at
the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business,
less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory
measured using LIFO or the retail inventory method. The amendments in this update are effective for the annual period ending after
December 15, 2016, and for annual periods and interim periods thereafter. The adoption of this update did not have a material impact
on our consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In February 2016, the FASB
issued ASU No. 2016-02 “Leases”. The new standard will require most leases to be recognized on the balance sheet which
will increase reported assets and liabilities. Lessor accounting remains substantially similar to current guidance. The new standard
is effective for annual and interim periods in fiscal years beginning after December 15, 2018, which for us is the first quarter
of fiscal 2019 and mandates a modified retrospective transition method. We do not intend to early adopt and are currently assessing
the impact of this update, but preliminarily believe that its adoption will not have a material impact on our consolidated financial
statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In April 2016, the FASB
issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”. The new standard simplifies several
aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures,
and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU No. 2016-09 is effective
for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The adoption of this update
did not have a material impact on our consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In June 2016, the FASB issued
ASU No. 2016-13, “Financial Instruments—Credit Losses.” The standard modifies the impairment model for most financial
assets, including trade accounts receivables and loans, and will require the use of an “expected loss” model for instruments
measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments
and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount
expected to be collected on the financial asset. The effective date of the standard is for fiscal years beginning after December
15, 2019 with early adoption permitted. We are currently evaluating the impact of adoption of this update on our consolidated financial
statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In August 2016, the FASB
issued ASU No. 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments”<i>.</i>
The new standard attempts to reduce diversity in practice in how cash receipts and cash payments are presented and classified in
the statement of cash flows. ASU No. 2016-15 provides guidance on eight specific cash flow issues. The new guidance will be effective
for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted including
adoption in an interim period. We do not intend to early adopt and we are currently assessing the impact of adoption of this update
will have on our consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In October 2016, the FASB
issued ASU No. 2016-16, “Income Taxes: Intra-Entity Transfers of Assets Other than Inventory”. The new standard requires
entities should recognize the income tax consequences of an asset other than inventory when the asset transfer occurs. The new
guidance will be effective for fiscal years beginning after December 15, 2017 and requires a modified retrospective adoption through
a cumulative effect adjustment directly to retained earnings as of the beginning of the period of adoption. We are currently evaluating
the impact of adoption of this update on our consolidated financial statements.</p>
348000
337000
52000
47000
1600000
1400000
42800000
43100000
336000
42800000
400000
872000
1200000
55000
108000
32000
199000
2600000
2900000
828000
1500000
263000
27000
0
1000
5058000
4353000
1773000
1699000
1520000
2300000
0.12
1553000
69000
50000000
-4175000
45825000
13000
45812000
2544000
43145000
5000000
3200000
700000
900000
733659
425000
47100000
22100000
Expire beginning for the year ended December 31, 2020 through 2036
Expire beginning for the year ended December 31, 2020 through 2036
5000000
5000000
If, on the 18th month anniversary of the closing date, there are funds remaining in the escrow account, then the escrow account will be reduced by the difference, if a positive number, of (i) $2.5 million minus (ii) the aggregate amount of all escrow claims asserted by Mylan prior to this date that have either been paid out of the escrow account or are pending as of such date, and, within two business days of such date, the Escrow Agent will disburse such difference, if a positive number, to us. Within two business days of the second anniversary of the closing date, the Escrow Agent will release any funds remaining in the escrow account to us minus any amounts being reserved for escrow claims asserted by Mylan prior to such date. Upon the resolution of any pending escrow claims, the Escrow Agent will, within two business days of receipt of joint instructions or a final order from a court (as described in the Escrow Agreement) disburse such reserved amount to the parties entitled to such funds.
2022-03-29
506000
506000
1012000
689909
209559
675000
170000
1867000
219000
265000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Discontinued Operations Carve Out and ProPhase Allocations</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">For the three months ended
March 31, 2017 and 2016, results from operations for our Cold-EEZE<sup>®</sup> Business are classified as discontinued operations.
The carve out of the discontinued operations (i) were prepared in accordance with the SEC’s carve out rules under Staff
Accounting Bulletin (“SAB”) Topic 1B1 and (ii) are derived from identifying and carving out the specific assets, liabilities,
net sales, cost of sales, operating expenses and interest expense associated with the Cold-EEZE<sup>® </sup>Business’s
operations. General administrative and overhead expenses, including personnel expenses and bonuses, and research and development
overhead expenses incurred by us (for which the discontinued operation benefits from such resources) are allocated to discontinued
operations based upon the percentage of the Cold-EEZE<sup>®</sup> Business’s net sales to our consolidated net sales.
For the three months ended March 31, 2017 and 2016, we allocated (i) $348,000 and $337,000, respectively, of administrative expenses
and (ii) $52,000 and $47,000, respectively, of research and development expenses, to discontinued operations in the accompanying
condensed statements of operations (see Note 4).</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> The net proceeds received from the sale
of the Cold-EEZE<sup>®</sup> Business were as follows (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 36pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Amount</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(as restated)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 82%"><font style="font-size: 10pt">Gross consideration from the sale of the Cold-EEZE<sup>® </sup>Business</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">50,000</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Closing and transaction costs</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(4,175</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Net proceeds from sale of the Cold-EEZE<sup>®</sup> Business</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">45,825</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Book value of assets sold</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(13</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Gain on sale of the Cold-EEZE<sup>®</sup> Business before income taxes</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">45,812</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Income tax expense</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(2,544</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Gain on sale of the Cold-EEZE<sup>®</sup> Business after income taxes</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">43,268</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Net proceeds:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Cash paid at closing, net of closing and transaction costs</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">43,145</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Proceeds due on sale of assets, cash held in escrow</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5,000</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">48,145</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The following table sets
forth the components of other current liabilities at March 31, 2017 and December 31, 2016, respectively, (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">March 31,</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">December 31,</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 64%; padding-left: 2pt"><font style="font-size: 10pt">Accrued bonuses and other employee compensation</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">1,867</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">170</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 2pt"><font style="font-size: 10pt">Contract termination fee payable</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">675</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 2pt"><font style="font-size: 10pt">Other accrued expenses</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">265</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">219</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; padding-left: 2pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,807</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">389</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
2100000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The following table sets
forth the condensed operating results of our discontinued operations for the three months ended March 31, 2017 and 2016, respectively,
(in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 54pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Three Months Ended March 31,</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2017</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2016</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 64%"><font style="font-size: 10pt">Net sales</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">5,058</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">4,353</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Cost of sales</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,773</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,699</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Sales and marketing</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,520</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,300</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Administration</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">348</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">337</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Research and development</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">52</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">47</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Income (loss) from discontinued operations</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,365</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(30</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="margin: 0pt"></p>
P3Y
P7Y
P5Y
P10Y
P39Y
P3Y
P10Y
P3Y
17156776
2017
1500000
5000000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Note 1 – Organization and Business </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">ProPhase Labs, Inc. (“we”,
“us” or the “Company”) was initially organized in Nevada in July 1989. Effective June 18, 2015, we changed
our state of incorporation from the State of Nevada to the State of Delaware. We are a manufacturer, marketer and distributor of
a diversified range of health care and cold remedy products that are offered to the general public. We also perform contract manufacturing
services of lozenge-based products for third parties. We are also engaged in the research and development of potential over-the-counter
(“OTC”) drug and natural base health products including supplements, personal care and cosmeceutical products.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Discontinued Operations</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Prior to March 29, 2017,
our flagship OTC drug brand was Cold-EEZE<sup>Ò </sup>and our principal product was Cold-EEZE<sup>Ò </sup>cold remedy
zinc gluconate lozenges, proven in clinical studies to reduce the duration and severity of symptoms of the common cold. In addition
to Cold-EEZE<sup>®</sup> cold remedy lozenges, we also marketed and distributed non-lozenge forms of our proprietary zinc
gluconate formulation, (i) Cold-EEZE<sup>® </sup>cold remedy QuickMelts<sup>®</sup>, (ii) Cold-EEZE<sup>® </sup>Gummies
and (iii) Cold-EEZE<sup>®</sup> cold remedy Oral Spray. Each of the Cold-EEZE<sup>®</sup> QuickMelts<sup>® </sup>and
Gummies products are based on a proprietary zinc gluconate formulation in combination with certain (i) immune system support, (ii)
energy, (iii) sleep and relaxation, and/or (iv) cold and flu symptom relieving active ingredients.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">On January 6, 2017, we signed
an asset purchase agreement (as amended, the “Asset Purchase Agreement”), by and among the Company, Meda Consumer Healthcare
Inc. (“MCH”) and Mylan Inc. (together with MCH, “Mylan”), for the sale of assets by us to Mylan (see Note
4). The sale of assets (i) was subject to stockholder approval and other customary closing conditions and (ii) consisted principally
of the sale of our intellectual property rights and other assets relating to our Cold-EEZE<sup>® </sup>brand and product line
(collectively, referred to herein as the “Cold-EEZE<sup>®</sup> Business”) to Mylan, including all current and
pipeline over-the-counter allergy, cold, flu, multi-symptom relief and immune support treatments for adults and children to the
extent each is, or is intended to be, branded “Cold-EEZE<sup>®</sup>”, and all private label versions thereof,
including all formulations and derivatives thereof as set forth in the Asset Purchase Agreement.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">A special meeting of our
stockholders was held on March 29, 2017 (the “Special Meeting”). At the Special Meeting, our stockholders approved
the sale of assets and the transactions contemplated by the Asset Purchase Agreement. Effective March 29, 2017, we completed the
sale of the Cold-EEZE<sup>® </sup>Business to Mylan. As a consequence of the sale of the Cold-EEZE<sup>® </sup>Business,
for the three months ended March 31, 2017 and 2016, we have classified as discontinued operations the (i) gain from the sale of
the Cold-EEZE<sup>®</sup> Business, (ii) all gains and losses attributable to the Cold-EEZE<sup>®</sup> Business and
(iii) the income tax expense attributed to the sale of the Cold-EEZE<sup>®</sup> Business (see Notes 3 and 6). Excluded from
the sale of the Cold-EEZE<sup>® </sup>Business were our accounts receivable and inventory, and we also retained all liabilities
associated with our Cold-EEZE<sup>® </sup>Business operations arising prior to March 29, 2017.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Continuing Operations</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We continue to own and operate
our manufacturing facility and manufacturing business in Lebanon, Pennsylvania, and our headquarters in Doylestown, Pennsylvania.
As part of the sale of the Cold-EEZE<sup>®</sup> Business, we entered into a manufacturing agreement (see Note 9) with Mylan
and our wholly-owned subsidiary, Pharmaloz Manufacturing, Inc. (“PMI”) to supply various Cold-EEZE<sup>® </sup>lozenge
products to Mylan. In addition to the services we provide to Mylan under the manufacturing agreement, we produce OTC drug and dietary
supplement lozenges and other products for other third party customers in addition to performing operational tasks such as warehousing,
customer order processing and shipping.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We are also pursuing a series
of new product development and pre-commercialization initiatives in the dietary supplement category. Initial dietary supplement
product development activities were completed in the fourth quarter of Fiscal 2015 under the brand name of TK Supplements<sup>®</sup>.
The TK Supplements<sup>®</sup> product line comprises three men’s health products: (i) Legendz XL<sup>®</sup> for
sexual health, (ii) Triple Edge XL<sup>®</sup>, a daily energy booster plus testosterone support, and (iii) Super ProstaFlow
Plus<sup>TM</sup> for prostate and urinary health. We recently completed a broad series of clinical studies which support important
product claims which have now been incorporated in our product packaging and marketing communications. In addition to developing
direct-to-consumer marketing strategies, we have received initial product acceptance into a national chain drug retailer and several
regional retailers to begin shipments of Legendz XL<sup>®</sup> to such retailers during the second or third quarter of Fiscal
2017.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">For the three months ended
March 31, 2017 and 2016, our revenues from continuing operations have come principally from our OTC health care products.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We use a December 31 year-end
for financial reporting purposes. References herein to “Fiscal 2017” shall mean the fiscal year ended December 31,
2017 and references to other “Fiscal” years shall mean the year, which ended on December 31 of the year indicated.
The term “we”, “us” or the “Company” as used herein also refer, where appropriate, to the
Company, together with its subsidiaries and consolidated variable interest entities unless the context otherwise requires.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Note 3 – Summary of Significant Accounting Policies</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Basis of Presentation</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The unaudited condensed
consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial
statements and within the rules of the Securities and Exchange Commission (“SEC”) applicable to interim financial statements
and therefore do not include all disclosures that might normally be required for financial statements prepared in accordance with
accounting principles generally accepted in the United States of America (“GAAP”). The accompanying unaudited condensed
consolidated financial statements have been prepared by management without audit and should be read in conjunction with our consolidated
financial statements, including the notes thereto, appearing in our Annual Report on Form 10-K for the year ended December 31,
2016. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial position, consolidated
results of operations and consolidated cash flows, for the periods indicated, have been made. The results of operations for the
three months ended March 31, 2017 are not necessarily indicative of operating results that may be achieved over the course of the
full year. Historical financial statements have been reclassified to conform to the current period presentation, principally reflecting
the sale of Cold-EEZE<sup>®</sup> Business as discontinued operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Discontinued Operations Carve Out and ProPhase Allocations</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">For the three months ended
March 31, 2017 and 2016, results from operations for our Cold-EEZE<sup>®</sup> Business are classified as discontinued operations.
The carve out of the discontinued operations (i) were prepared in accordance with the SEC’s carve out rules under Staff Accounting
Bulletin (“SAB”) Topic 1B1 and (ii) are derived from identifying and carving out the specific assets, liabilities,
net sales, cost of sales, operating expenses and interest expense associated with the Cold-EEZE<sup>® </sup>Business’s
operations. General administrative and overhead expenses, including personnel expenses and bonuses, and research and development
overhead expenses incurred by us (for which the discontinued operation benefits from such resources) are allocated to discontinued
operations based upon the percentage of the Cold-EEZE<sup>®</sup> Business’s net sales to our consolidated net sales.
For the three months ended March 31, 2017 and 2016, we allocated (i) $348,000 and $337,000, respectively, of administrative expenses
and (ii) $52,000 and $47,000, respectively, of research and development expenses, to discontinued operations in the accompanying
condensed statements of operations (see Note 4).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 31.5pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Seasonality of the Business</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Our net sales are derived
principally from our OTC heath care and cold remedy products sold in the United States of America. Our sales are influenced by
and subject to fluctuations in the timing of purchase and the ultimate level of demand for our products which are a function of
the timing, length and severity of each cold season. Generally, a cold season is defined as the period of September to March when
the incidence of the common cold rises as a consequence of the change in weather and other factors. We generally experience in
the first, third and fourth quarter higher levels of net sales. Revenues are generally at their lowest levels in the second quarter
when customer demand generally declines.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 31.5pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 31.5pt">For the three months ended
March 31, 2017 and 2016, our net sales were principally related to domestic markets.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 36pt"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Use of Estimates</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The preparation of financial
statements and the accompanying notes thereto, in conformity with GAAP, requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the respective reporting periods. Examples include the provision
for bad debt, sales returns and allowances, inventory obsolescence, useful lives of property and equipment and intangible assets,
impairment of property and equipment and intangible assets, income tax valuations and assumptions related to accrued advertising.
When providing for the appropriate sales returns, allowances, cash discounts and cooperative incentive promotion costs (“Sales
Allowances”), we apply a uniform and consistent method for making certain assumptions for estimating these provisions. These
estimates and assumptions are based on historical experience, current trends and other factors that management believes to be relevant
at the time the financial statements are prepared. Management reviews the accounting policies, assumptions, estimates and judgments
on a quarterly basis. Actual results could differ from those estimates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Factors considered in estimating
the appropriate sales returns and allowances for the Cold-EEZE<sup>®</sup> cold remedy lozenge products include it being (i)
a unique product with limited competitors, (ii) competitively priced, (iii) promoted, (iv) unaffected for remaining shelf-life
as there is no product expiration date and (v) monitored for inventory levels at major customers and third-party consumption data.
In addition to Cold-EEZE<sup>®</sup> cold remedy lozenges, we have marketed and distributed a variety of Cold-EEZE<sup>®</sup>
cold remedy QuickMelts<sup>®</sup>, a Cold-EEZE<sup>® </sup>cold remedy Oral Spray, a Cold-EEZE<sup>® </sup>Natural
Allergy Relief caplets, a Cold-EEZE<sup>®</sup> Daytime and Nighttime Multi-Symptom Relief in a liquid form and our new Cold-EEZE<sup>®</sup>
Gummies Multi-Symptom Relief for Cold and Flu. We also manufacture, market and distribute an organic cough drop and a Vitamin C
supplement. Each of the Cold-EEZE<sup>®</sup> cold remedy Oral Spray, QuickMelts<sup>® </sup>and Gummies products, Cold-EEZE<sup>®</sup>
Natural Allergy Relief caplets, Cold-EEZE<sup>®</sup> liquid forms and organic lozenge products carry shelf-life expiration
dates for which we aggregate such new product market experience data and update our sales returns and allowances estimates accordingly.
Sales allowances estimates are tracked at the specific customer and product line levels and are tested on an annual historical
basis, and reviewed quarterly. Additionally, we monitor current developments by customer, market conditions and any other occurrences
that could affect the expected provisions relative to net sales for the period presented.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Cash Equivalents</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i> </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We consider all highly liquid
investments with a maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents include cash
on hand and monies invested in money market funds. The carrying amount approximates the fair market value due to the short-term
maturity of these investments.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 36pt"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Inventory Valuation </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Inventory is valued at the
lower of cost, determined on a first-in, first-out basis (FIFO), or market. Inventory items are analyzed to determine cost and
the market value and appropriate valuation adjustments are established. At March 31, 2017 and December 31, 2016, the financial
statements include adjustments to reduce inventory for excess or obsolete inventory of $1.4 million and $1.6 million, respectively.
The components of inventory are as follows (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 36pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">March 31,</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">December 31,</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%; padding-left: 1.5pt"><font style="font-size: 10pt">Raw materials</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,257</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,404</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 1.5pt"><font style="font-size: 10pt">Work in process</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">438</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">466</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 1.5pt"><font style="font-size: 10pt">Finished goods</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">460</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">866</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; padding-left: 1.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,155</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,736</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Property, Plant and Equipment</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Property, plant and equipment
are recorded at cost. We use the straight-line method in computing depreciation for financial reporting purposes. Depreciation
expense is computed in accordance with the following ranges of estimated asset lives: building and improvements – ten to
thirty-nine years; machinery and equipment – three to seven years; computer software – three years; and furniture and
fixtures – five years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Concentration of Risks</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"><b><i> </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Future revenues, costs,
margins and profits will continue to be influenced by our ability to maintain our manufacturing availability and capacity together
with our marketing and distribution capabilities and the regulatory requirements associated with the development of OTC and other
personal care products in order to compete on a national level and/or international level.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Our business is subject
to federal and state laws and regulations adopted for the health and safety of users of our products. Our OTC health care products
are subject to regulations by various federal, state and local agencies, including the Food and Drug Administration (“FDA”)
and, as applicable, the Homeopathic Pharmacopoeia of the United States.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Financial instruments that
potentially subject us to significant concentrations of credit risk consist principally of cash investments and trade accounts
receivable.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We maintain cash and cash
equivalents with certain major financial institutions. As of March 31, 2017, our cash balance was $42.8 million and our bank balance
was $43.1 million. Of the total bank balance, $336,000 was covered by federal depository insurance and $42.8 million was uninsured
at March 31, 2017.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Trade accounts receivable
potentially subject us to credit concentrations from time-to-time as a consequence of the timing, payment pattern and ultimate
purchase volumes or shipping schedules with our customers. We extend credit to our customers based upon an evaluation of the customer’s
financial condition and credit history and generally we do not require collateral. Our broad range of customers includes many large
national chain, regional, specialty and local retail stores. These credit concentrations may impact our overall exposure to credit
risk, either positively or negatively, in that our customers may be similarly affected by changes in economic, regulatory or other
conditions that may impact the timing and collectability of amounts due to us. As a consequence of an evaluation of our customer’s
financial condition, payment patterns, balance due to us and other factors, we did not offset our account receivable with an allowance
for bad debt at March 31, 2017 and December 31, 2016.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Long-lived Assets</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We review our carrying value
of our long-lived assets with definite lives whenever events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable. When indicators of impairment exist, we determine whether the estimated undiscounted sum of the
future cash flows of such assets is less than their carrying amounts. If less, an impairment loss is recognized in the amount,
if any, by which the carrying amount of such assets exceeds their respective fair values. The determination of fair value is based
on quoted market prices in active markets, if available, or independent appraisals; sales price negotiations; or projected future
cash flows discounted at a rate determined by management to be commensurate with our business risk. The estimation of fair value
utilizing discounted forecasted cash flows includes significant judgments regarding assumptions of revenue, operating and marketing
costs; selling and administrative expenses; interest rates; property and equipment additions and retirements; industry competition;
and general economic and business conditions, among other factors.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Fair value is based on the
prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. In order to increase consistency and comparability in fair value measurements, a three-tier fair value
hierarchy prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as observable inputs such as
quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly
or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring
an entity to develop its own assumptions.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Fair Value of Financial Instruments </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"><b><i> </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Cash and cash equivalents,
accounts receivable, assets held for sale, accounts payable, accrued expenses and notes payable are reflected in the Condensed
Consolidated Financial Statements at carrying value which approximates fair value.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Revenue Recognition</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 36pt"><b><i> </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Sales are recognized at
the time ownership is transferred to the customer. Revenue is reduced for trade promotions, estimated sales returns, cash discounts
and other allowances in the same period as the related sales are recorded. We make estimates of potential future product returns
and other allowances related to current period revenue. We analyze historical returns, current trends, and changes in customer
and consumer demand when evaluating the adequacy of the sales returns and other allowances.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Our return policy accommodates
returns for (i) discontinued products, (ii) store closings and (iii) products that have reached or exceeded their designated expiration
date. We do not impose a period of time within which product may be returned. All requests for product returns must be submitted
to us for pre-approval. The main components of our returns policy are: (i) we will accept returns that are due to damaged product
that is un-saleable and such return request activity falls within an acceptable range, (ii) we will accept returns for products
that have reached or exceeded designated expiration dates and (iii) we will accept returns in the event that we discontinue a product
provided that the customer will have the right to return only such items that it purchased directly from us. We will not accept
return requests pertaining to customer inventory “Overstocking” or “Resets”. We will only accept return
requests for product in its intended package configuration. We reserve the right to terminate shipment of product to customers
who have made unauthorized deductions contrary to our return policy or pursue other methods of reimbursement. We compensate the
customer for authorized returns by means of a credit applied to amounts owed or to be owed and in the case of discontinued product
only, also by way of an exchange. We do not have any significant product exchange history.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Pursuant to the terms of
the Asset Purchase Agreement, we are responsible for and continue to accept product returns of the Cold-EEZE<sup>® </sup>Business
for product shipped prior to March 30, 2017. Additionally, pursuant to the terms of the Asset Purchase Agreement, we allocated
and agreed to pay Mylan an aggregate of $400,000 for future sales returns and allowances arising from certain product returns that
were sold by us prior to March 30, 2017.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">As of March 31, 2017 and
December 31, 2016, we included a provision for sales allowances of $55,000 and $108,000, respectively. Additionally, accrued advertising
and other allowances as of March 31, 2017 included (i) $872,000 for estimated future sales returns and (ii) $828,000 for cooperative
incentive promotion costs. As of December 31, 2016, accrued advertising and other allowances included (i) $1.2 million for estimated
future sales returns and (ii) $1.5 million for cooperative incentive promotion costs.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Advertising and Incentive Promotions</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Advertising and incentive
promotion costs are expensed within the period in which they are utilized. Advertising and incentive promotion expense is comprised
of (i) media advertising, presented as part of sales and marketing expense, (ii) cooperative incentive promotions and coupon program
expenses, which are accounted for as part of net sales, and (iii) free product, which is accounted for as part of cost of sales.
Advertising and incentive promotion expenses incurred (i) from continuing operations for the three months ended March 31, 2017
and 2016 were $32,000 and $199,000, respectively, and (ii) attributed to and classified as discontinued operations were $2.6 million
and $2.9 million, respectively. Included in prepaid expenses and other current assets was $27,000 and $263,000 at March 31, 2017
and December 31, 2016, respectively, relating to prepaid advertising and promotion expenses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Shipping and Handling </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Product sales carry shipping
and handling charges to the purchaser, included as part of the invoiced price, which is classified as revenue. In all cases, costs
related to this revenue are recorded in cost of sales.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Stock-Based Compensation</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We recognize all share-based
payments to employees and directors, including grants of stock options, as compensation expense in the financial statements based
on their fair values. Fair values of stock options are determined through the use of the Black-Scholes option pricing model. The
compensation cost is recognized as an expense over the requisite service period of the award, which usually coincides with the
vesting period.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Stock and stock options
for the purchase of our common stock, $0.0005 par value (“Common Stock”), have been granted to both employees and non-employees
pursuant to the terms of certain agreements and stock option plans (see Note 6). Stock options are exercisable during a period
determined by us, but in no event later than ten years from the date granted. For the three months ended March 31, 2017 and 2016,
we charged to operations zero and $1,000, respectively, for share-based compensation expense for the aggregate fair value of stock
grants issued and vested stock options earned.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Research and Development</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Research and development
costs are charged to operations in the period incurred. Research and development costs incurred for the three months ended March
31, 2017 and 2016 (i) from continuing operations were $34,000 and $38,000, respectively, and (ii) attributed to and classified
as discontinued operations of $52,000 and $47,000, respectively. Research and development costs are principally related to personnel
expenses and new product development initiatives and costs associated with our OTC health care products.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Income Taxes</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We utilize the asset and
liability approach which requires the recognition of deferred tax assets and liabilities for the future tax consequences of events
that have been recognized in our financial statements or tax returns. In estimating future tax consequences, we generally consider
all expected future events other than enactments of changes in the tax law or rates. Until we have sufficient taxable income to
offset the temporary timing differences attributable to operations and the tax deductions attributable to option, warrant and stock
activities are assured, a valuation allowance equaling the total deferred tax asset is being provided (see Notes 4 and 7).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We utilize a two-step approach
to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining
if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount
which is more than fifty percent likely of being realized upon ultimate settlement. Any interest or penalties related to income
taxes will be recorded as interest or administrative expense, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">As a result of our continuing
tax losses, we have recorded a full valuation allowance against a net deferred tax asset. Additionally, we have not recorded a
liability for unrecognized tax benefits.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Recently Issued Accounting Standards</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In May 2014, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue
from Contracts with Customers”, on revenue recognition. The new standard provides for a single five-step model to be applied
to all revenue contracts with customers as well as requires additional financial statement disclosures that will enable users to
understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. Companies have
an option to use either a retrospective approach or cumulative effect adjustment approach to implement the standard. This ASU,
as amended, is effective for fiscal years and interim periods within those years beginning after December 15, 2017. We are currently
assessing the impact of this update, but preliminarily believe that its adoption will not have a material impact on our consolidated
financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In July 2015, the FASB issued
ASU No. 2015-11 “Simplifying the Measurement of Inventory” which requires an entity to measure inventory balances at
the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business,
less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory
measured using LIFO or the retail inventory method. The amendments in this update are effective for the annual period ending after
December 15, 2016, and for annual periods and interim periods thereafter. The adoption of this update did not have a material impact
on our consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In February 2016, the FASB
issued ASU No. 2016-02 “Leases”. The new standard will require most leases to be recognized on the balance sheet which
will increase reported assets and liabilities. Lessor accounting remains substantially similar to current guidance. The new standard
is effective for annual and interim periods in fiscal years beginning after December 15, 2018, which for us is the first quarter
of fiscal 2019 and mandates a modified retrospective transition method. We do not intend to early adopt and are currently assessing
the impact of this update, but preliminarily believe that its adoption will not have a material impact on our consolidated financial
statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In April 2016, the FASB
issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”. The new standard simplifies several
aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures,
and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU No. 2016-09 is effective
for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The adoption of this update
did not have a material impact on our consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In June 2016, the FASB issued
ASU No. 2016-13, “Financial Instruments—Credit Losses.” The standard modifies the impairment model for most financial
assets, including trade accounts receivables and loans, and will require the use of an “expected loss” model for instruments
measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments
and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount
expected to be collected on the financial asset. The effective date of the standard is for fiscal years beginning after December
15, 2019 with early adoption permitted. We are currently evaluating the impact of adoption of this update on our consolidated financial
statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In August 2016, the FASB
issued ASU No. 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments”<i>.</i>
The new standard attempts to reduce diversity in practice in how cash receipts and cash payments are presented and classified in
the statement of cash flows. ASU No. 2016-15 provides guidance on eight specific cash flow issues. The new guidance will be effective
for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted including
adoption in an interim period. We do not intend to early adopt and we are currently assessing the impact of adoption of this update
will have on our consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In October 2016, the FASB
issued ASU No. 2016-16, “Income Taxes: Intra-Entity Transfers of Assets Other than Inventory”. The new standard requires
entities should recognize the income tax consequences of an asset other than inventory when the asset transfer occurs. The new
guidance will be effective for fiscal years beginning after December 15, 2017 and requires a modified retrospective adoption through
a cumulative effect adjustment directly to retained earnings as of the beginning of the period of adoption. We are currently evaluating
the impact of adoption of this update on our consolidated financial statements.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 4 – Discontinued Operations,
Sale of the Cold-EEZE<sup>®</sup> Business </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">At the Special Meeting held
on March 29, 2017, our stockholders approved the sale of the Cold-EEZE<sup>®</sup> Business and the transactions contemplated
by the Asset Purchase Agreement. Effective March 29, 2017, we completed the sale of the Cold-EEZE<sup>® </sup>Business to
Mylan.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">As a consequence of the
sale of the Cold-EEZE<sup>®</sup> Business, for the three months ended March 31, 2017 and 2016, we classified as discontinued
operations (i) the gain from the sale of the Cold-EEZE<sup>®</sup> Business, (ii) all gains and losses attributable to the
Cold-EEZE<sup>®</sup> Business operations and (iii) the income tax expense attributed to the sale of the Cold-EEZE<sup>®
</sup>Business (see Note 7). Excluded from the sale of the Cold-EEZE<sup>® </sup>Business were our accounts receivable and
inventory, and we also retained all liabilities associated with our Cold-EEZE<sup>® </sup>Business operations arising prior
to March 29, 2017.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Pursuant to the Asset Purchase
Agreement, we also agreed to a one-time sale to Mylan of certain non-lozenge-based Cold-EEZE<sup>®</sup> inventory for approximately
$699,000 which approximates our cost. At March 31, 2017, we classified in our balance sheet this inventory as an asset held for
sale, discontinued operations. Additionally, pursuant to the terms of the Asset Purchase Agreement, we allocated and agreed to
pay Mylan an aggregate of $400,000 for future a sales returns and allowances arising from certain product returns that were sold
by us prior to March 30, 2017. At March 31, 2017, we classified in our balance sheet this liability as an accrued sales allowances,
discontinued operations. At December 31, 2016, the balance sheet impact of discontinued operations was deemed not material, as
such no reclassifications for discontinued operations have be presented.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The net proceeds received
from the sale of the Cold-EEZE<sup>®</sup> Business were as follows (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 36pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Amount</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(as restated)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 82%"><font style="font-size: 10pt">Gross consideration from the sale of the Cold-EEZE<sup>® </sup>Business</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">50,000</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Closing and transaction costs</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(4,175</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Net proceeds from sale of the Cold-EEZE<sup>®</sup> Business</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">45,825</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Book value of assets sold</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(13</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Gain on sale of the Cold-EEZE<sup>®</sup> Business before income taxes</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">45,812</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Income tax expense</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(2,544</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Gain on sale of the Cold-EEZE<sup>®</sup> Business after income taxes</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">43,268</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Net proceeds:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt"><font style="font-size: 10pt">Cash paid at closing, net of closing and transaction costs</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">43,145</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Proceeds due on sale of assets, cash held in escrow</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">5,000</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">48,145</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 90pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">For the three months ended
March 31, 2017, we incurred $4.2 million in closing and transaction costs associated with the sale of the Cold-EEZE<sup>®</sup>
Business which were comprised of (i) transaction fees and related closing costs of $1.9 million and (ii) performance bonuses, contract
termination compensation and severance payments to certain employees associated with the sale of the Cold-EEZE<sup>®</sup>
Business of $2.3 million (see Note 8). Our compensation committee of the board of directors approved these compensation arrangements.
These compensation and termination payments were paid by us in April 2017.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The following table sets
forth the condensed operating results of our discontinued operations for the three months ended March 31, 2017 and 2016, respectively,
(in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 54pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Three Months Ended March 31,</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2017</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2016</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 64%"><font style="font-size: 10pt">Net sales</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">5,058</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">4,353</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Cost of sales</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,773</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,699</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Sales and marketing</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,520</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,300</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Administration</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">348</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">337</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Research and development</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">52</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">47</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Income (loss) from discontinued operations</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,365</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(30</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 54pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 5 – Secured Promissory Notes
and Other Obligations </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Secured Promissory Notes</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 24.5pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">On December 11, 2015, we
executed two Subscription Agreements (the “Subscription Agreements”) with the investors named therein (the “Investors”)
providing for the purchase of 12% Secured Promissory Notes – Series A (“ Notes”) in the aggregate principal amount
of up to $3.0 million and warrants to purchase shares of our Common Stock (the “Warrants”).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 24.5pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Notes in the amount of $1.5
million and 51,000 Warrants, at an exercise price of $1.35 per share, which was equal to the closing price of our Common Stock
on the date of investment, were issued by the Company and its wholly-owned subsidiaries, PMI and Quigley Pharma, Inc. (collectively,
the “Obligors”), and funded on December 11, 2015. We incurred loan origination costs of $22,000 which was recorded
as a reduction of the Notes and the origination costs are charged to interest expense over the term of the loan. The Warrants have
an exercise term equal to three years and are exercisable commencing on the date of issuance. The fair value of the Warrants at
the date of grant was $14,000 which is recorded as a reduction of the Notes and is charged to interest expense over the term of
the loan.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The Notes bore interest
at the rate of 12% per annum, payable semi-annually and the principal is due and payable on June 15, 2017. The Notes may be pre-paid
at any time prior to maturity without penalty. The effective interest, inclusive of the Warrant and loan origination costs, is
14.3% per annum. For the three months ended March 31, 2017 and 2016, we charged to interest expense $54,000 and $52,000, respectively,
in connection with the Notes.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">On March 29, 2017, in connection
with the sale of the Cold-EEZE<sup>®</sup> Business, we paid in full the remaining principal and accrued interest, in the
total amount of $1,553,000, due under the Notes. Of the $1,553,000 paid to the Investors, $69,000 was netted against the aggregate
exercise price of the Warrants, which were simultaneously being exercised by the Investors.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In connection with the
issuance of the Notes, the Company entered into a security agreement with John E. Ligums, Jr., as collateral agent for the Investors
(the “Security Agreement”) to secure the timely payment and performance in full of the Company’s obligations
under the Notes. Under the Security Agreement, we granted to the collateral agent, for the benefit of the Investors a lien upon
and security interest in the property and assets listed as collateral in the Security Agreement, including without limitation,
all of our personal property, inventory, equipment, general intangibles, cash and cash equivalents, and proceeds. In connection
with the payoff of the Notes, the Security Agreement was terminated.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 6 – Transactions Affecting Stockholders’
Equity</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Our authorized capital stock
consists of 50 million shares of Common Stock and 1 million shares of preferred stock, $.0005 par value (“Preferred Stock”).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Preferred Stock </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">On June 16, 2015, our stockholders
approved the change to our state of incorporation from the State of Nevada to the State of Delaware pursuant to a plan of conversion
(the “Conversion Plan”) and the filing of a certificate of incorporation in the State of Delaware. The Preferred Stock
authorized under our certificate of incorporation may be issued from time to time in one or more series. As of March 31, 2017,
no shares of Preferred Stock have been issued. Our board of directors has the full authority permitted by law to establish, without
further stockholder approval, one or more series of Preferred Stock and the number of shares constituting each such series and
to fix by resolution voting powers, preferences and relative, participating, optional and other special rights of each series of
Preferred Stock, and the qualifications, limitations or restrictions thereof, if any. Subject to the limitation on the total number
of shares of Preferred Stock that we have authority to issue under our certificate of incorporation, the board of directors is
also authorized to increase or decrease the number of shares of any series, subsequent to the issue of that series, but not below
the number of shares of such series then-outstanding. In case the number of shares of any series is so decreased, the shares constituting
such decrease will resume the status that they had prior to the adoption of the resolution originally fixing the number of shares
of such series. We may amend from time to time our certificate of incorporation and bylaws to increase the number of authorized
shares of Preferred Stock or Common Stock or to make other changes or additions to our capital structure or the terms of our capital
stock.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Stockholder Rights Plan</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">On September 8, 1998, our
Board of Directors declared a dividend distribution of Common Stock Purchase Rights (each individually, a “Right” and
collectively, the “Rights”) payable to our stockholders of record on September 25, 1998, thereby creating a Stockholder
Rights Plan (the “Rights Agreement”). The Plan was subsequently amended effective each of (i) May 23, 2008, (ii) August
18, 2009, (iii) June 18, 2014 and (iv) January 6, 2017. The Rights Agreement, as amended and restated, provides that each Right
entitles the stockholder of record to purchase from the Company that number of shares of Common Stock having a combined market
value equal to two times the Rights exercise price of $45. The Rights are not exercisable until the distribution date, which will
be the earlier of a public announcement that a person or group of affiliated or associated persons has acquired 15% or more of
the outstanding shares of Common Stock, or the announcement of an intention by a similarly constituted party to make a tender or
exchange offer resulting in the ownership of 15% or more of the outstanding shares of Common Stock (such person, the “acquirer”).
The Rights Agreement allows for an exemption for Ted Karkus, the Company’s Chairman and Chief Executive Officer, to acquire
up to 20% of our Common Stock without our Board of Directors declaring a dividend distribution.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The dividend has the effect
of diluting the acquirer by giving our other stockholders a 50% discount on our Common Stock’s current market value for exercising
the Rights. In the event of a cashless exercise of the Right and the acquirer has acquired less than 50% beneficial ownership of
the Company, a stockholder may exchange one Right for one share of Common Stock of the Company. The Rights Agreement, as amended,
includes a provision pursuant to which our Board of Directors may exempt from the provisions of the Rights Agreement an offer for
all outstanding shares of our Common Stock that the directors determine to be fair and not inadequate and to otherwise be in the
best interests of the Company and its stockholders, after receiving advice from one or more investment banking firms. The expiration
date of the Rights Agreement, as amended, is June 18, 2024.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Equity Line of Credit</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">On July 30, 2015, we entered
into a new equity line of credit agreement (such arrangement, the “2015 Equity Line”) with Dutchess Opportunity Fund
II, LP (“Dutchess”). Pursuant to the 2015 Equity Line, Dutchess committed to purchase, subject to certain restrictions
and conditions, up to 3,200,000 shares of our Common Stock, over a period of 36 months from the effectiveness of the registration
statement registering the resale of shares purchased by Dutchess pursuant to the Investment Agreement.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We may, at our discretion,
draw on the 2015 Equity Line from time to time, as and when we determine appropriate in accordance with the terms and conditions
of the 2015 Equity Line. The maximum number of shares that we are entitled to put to Dutchess in any one draw down notice shall
not exceed 500,000 shares with a purchase price calculated in accordance with the terms of the 2015 Equity Line. We may deliver
a notice for a subsequent put from time to time, following the one day pricing period for the prior put.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 36pt">  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The purchase price shall
be set at ninety-five percent (95%) of the volume weighted average price (VWAP) of the Common Stock during the one trading day
immediately following our put notice. We have the right to withdraw all or any portion of any put, except that portion of the put
that has already been sold to a third party, including any portion of a put that is below the minimum acceptable price set forth
on the put notice, before the closing. In the event Dutchess receives more than a five percent (5%) return on the net sales for
a specific put, Dutchess must remit such excess proceeds to us; however, in the event Dutchess receives less than a five percent
(5%) return on the net sales for a specific put, Dutchess will have the right to deduct from the proceeds of the put amount on
the applicable closing date so Dutchess’s return will equal five percent (5%).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">There are put restrictions
applied on days between the draw down notice date and the closing date with respect to that particular put. During such time, we
are entitled to deliver another draw down notice. In addition, Dutchess will not be obligated to purchase shares if Dutchess’
total number of shares beneficially held at that time would exceed 4.99% of the number of shares of Common Stock as determined
in accordance with Rule 13d-1(j) of the Securities Exchange Act of 1934, as amended. In addition, we are not permitted to draw
on the facility unless there is an effective registration statement to cover the resale of the shares.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Pursuant to the terms of
the 2015 Equity Line, we are obligated to file one or more registration statements with the SEC to register the resale by Dutchess
of the shares of Common Stock issued or issuable under the 2015 Equity Line. In addition, we are obligated to use all commercially
reasonable efforts to have the registration statement declared effective by the SEC within 90 days after the registration statement
is filed. On August 4, 2015, we filed a registration statement for the underlying shares of the 2015 Equity Line with the SEC and
the registration statement was declared effective by the SEC on August 21, 2015.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">At March 31, 2017, we have
2,450,000 shares of our Common Stock available for sale, at our discretion, under the terms of our 2015 Equity Line and covered
pursuant to an effective registration statement.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>The 2010 Equity Compensation Plan</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">On May 5, 2010, our stockholders
approved the 2010 Equity Compensation Plan which was subsequently amended, restated and approved by our stockholders on April 24,
2011, and further amended and approved by stockholders on May 6, 2013, and further amended and approved by stockholders on May
24, 2016 (the “2010 Plan”). The 2010 Plan provides that the total number of shares of Common Stock that may be issued
under the 2010 Plan is equal to 3.2 million shares, including 900,000 shares that are authorized for issuance but unissued under
a 1997 incentive stock option plan and 700,000 shares added to the 2010 Plan effective May 24, 2016. No options were granted under
the 2010 Plan for the three months ended March 31, 2017 or 2016. There were no stock options exercised for the three months ended
March 31, 2017 and 2016. At March 31, 2017, there were 1,699,000 options outstanding under the 2010 Plan and 733,659 options available
to be issued pursuant to the terms of the 2010 Plan.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>The 2010 Directors’ Equity Compensation
Plan</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">On May 5, 2010, our stockholders
approved the 2010 Directors’ Equity Compensation Plan which was subsequently amended and approved by stockholders on May
6, 2013. A primary purpose of the 2010 Directors’ Equity Compensation Plan is to provide us with the ability to pay all
or a portion of the fees of directors in restricted stock instead of cash. The 2010 Directors’ Equity Compensation Plan
provides that the total number of shares of Common Stock that may be issued under the 2010 Directors’ Equity Compensation
Plan is equal to 425,000. For the three months ended March 31, 2017 and 2016, no shares were granted to our directors. At March
31, 2017, there were 147,808 shares of Common Stock that may be issued pursuant to the terms of the 2010 Directors’ Equity
Compensation Plan.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 7 – Income Taxes</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 31.5pt">At December 31, 2016,
there are $47.1 million in net operating loss carryforwards, subject to applicable limitations, available to us for federal purposes
which will expire beginning for the year ended December 31, 2020 through 2036. Additionally, there were $22.1 million in net operating
loss carryforwards, subject to limitations, available to us for state purposes which will expire beginning for the year ended December
31, 2020 through 2036.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 31.5pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We believe that a significant
portion of our income tax liability arising from our taxable gain for federal and state income tax purposes from the sale of the
Cold-EEZE<sup>®</sup> Business will be offset to the extent of our current year losses from operations, the write-off for
tax purposes of the tax-basis of the Cold-EEZE<sup>® </sup>Business and the available net operating loss carryforwards at
the federal and state levels. However, for state income tax purposes, based upon the available state net operating loss carryforwards
and corresponding limitations, we estimate a net income tax expense arising from the sale of the Cold-EEZE<sup>®</sup> Business
of $2.1 million.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Utilization of net operating
loss carryforwards may be subject to limitations as set forth in Section 382 of the Internal Revenue Code (“Section 382”).
Based on our preliminary Section 382 analysis, we do not believe that our current net operating loss carryforwards are subject
to these limitations as of March 31, 2017. However, until we complete a final Section 382 analysis upon filing of our 2017 income
tax return, there can be no assurances that our preliminary analysis is accurate or complete. Should we identify any limitations
upon the completion of our final Section 382 analysis, the impact could be material to our consolidated financial statements and
that we could incur additional income tax expense arising from the sale of the Cold-EEZE<sup>®</sup> Business.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 31.5pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 31.5pt">For the three months ended
March 31, 2017, we charged to discontinued operations $2.5 million for estimated federal and state income taxes arising from the
sale of the Cold-EEZE<sup>®</sup> Business and we have realized an income tax benefit from continuing operations of $0.5 million
as a consequence of the utilization of the federal and state net operating losses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 31.5pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Subsequent to the income
tax effects arising from the sale of the Cold-EEZE<sup>®</sup> Business, we will continue to have net operating loss carry-forwards
for federal income tax purposes. Until sufficient taxable income to offset the temporary timing differences attributable to operations,
and the tax deductions attributable to option, warrant and stock activities are assured, a valuation allowance equaling the total
deferred tax asset is being provided. As a consequence of the accumulated losses of the Company, we believe that this allowance
is required due to the uncertainty of realizing these tax benefits in the future.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 8 – Other Accrued Liabilities</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The following table sets
forth the components of other current liabilities at March 31, 2017 and December 31, 2016, respectively, (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">March 31,</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt">December 31,</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 64%; padding-left: 2pt"><font style="font-size: 10pt">Accrued bonuses and other employee compensation</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">1,867</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 10pt">170</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 2pt"><font style="font-size: 10pt">Contract termination fee payable</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">675</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 2pt"><font style="font-size: 10pt">Other accrued expenses</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">265</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">219</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; padding-left: 2pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,807</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">389</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 9– Commitments and Contingencies
</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i><u>Escrow Receivable</u></i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We have indemnification
obligations to Mylan under the Asset Purchase Agreement that may require us to make future payments to Mylan and other related
persons for any damages incurred by Mylan or such related persons as a result of any breaches of our representations, warranties,
covenants or agreements contained in the Asset Purchase Agreement, or arising from the Retained Liabilities (as such term is defined
in the Asset Purchase Agreement) or certain third party claims specified in the Asset Purchase Agreement. Generally, our representations
and warranties survive for a period of 24 months from the closing date, other than certain fundamental representations which survive
until the expiration of the applicable statute of limitations. There is a limited indemnification cap with respect to a majority
of the Company’s indemnification obligations under the Asset Purchase Agreement with the exception of claims for actual fraud,
the breach of any fundamental representations and certain other items, which have a larger indemnification cap (e.g., the purchase
price).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Pursuant to the terms of
the Asset Purchase Agreement, we, Mylan, and an escrow agent entered into an Escrow Agreement at closing, pursuant to which Mylan
deposited $5 million of the aggregate purchase price for the Cold-EEZE<sup>®</sup> Business into an escrow account established
with the Escrow Agent in order to satisfy, in whole or in part, certain of our indemnity obligations under the Asset Purchase Agreement.
If, on the 18<sup>th </sup>month anniversary of the closing date, there are funds remaining in the escrow account, then the escrow
account will be reduced by the difference, if a positive number, of (i) $2.5 million minus (ii) the aggregate amount of all escrow
claims asserted by Mylan prior to this date that have either been paid out of the escrow account or are pending as of such date,
and, within two business days of such date, the Escrow Agent will disburse such difference, if a positive number, to us. Within
two business days of the second anniversary of the closing date, the Escrow Agent will release any funds remaining in the escrow
account to us minus any amounts being reserved for escrow claims asserted by Mylan prior to such date. Upon the resolution of any
pending escrow claims, the Escrow Agent will, within two business days of receipt of joint instructions or a final order from a
court (as described in the Escrow Agreement) disburse such reserved amount to the parties entitled to such funds.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Management does not believe
that we will be subject to indemnity claims contemplated by the Asset Purchase Agreement. However, in the event that such a claim
is made, and if successful, we would be required to pay Mylan pursuant to the indemnification provisions of the Asset Purchase
Agreement which may reduce the amount we ultimately collect from escrow or could even require us to return a portion of the net
proceeds received from the sale of the Cold-EEZE<sup>®</sup> Division.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i><u>Manufacturing Agreement</u></i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In connection with the Asset
Purchase Agreement, the Company and its wholly-owned subsidiary, PMI, entered into a Manufacturing Agreement (the “Manufacturing
Agreement”) with Mylan. Pursuant to the terms of the Manufacturing Agreement, Mylan (or an affiliate or designee) will purchase
the current inventory of the Company’s Cold-EEZE<sup>®</sup> brand and product line and PMI will manufacture certain
products for Mylan, as described in the Manufacturing Agreement, at prices that reflect current market conditions for such products
and include an agreed upon mark-up on our costs. Unless terminated sooner by the parties, the Manufacturing Agreement will remain
in effect until March 29, 2022. Thereafter, the Manufacturing Agreement may be renewed by Mylan for up to five successive one year
periods by providing notice of its intent to renew not less than 90 days prior to the expiration of the then-current term.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i><u>Transition Services Agreement</u></i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">In connection with the Asset
Purchase Agreement, we entered into a transition services agreement with Mylan to provide litigation support, insurance coverage,
supply chain, customer support, finance, accounting, commercial advertising and packaging services, quality control, IT and research
and development services to Mylan for time periods ranging from two to nine months from the closing date. We will continue to incur
certain operating costs during the transition period to support Mylan.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i><u>Future Obligations:</u></i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">We have estimated future
minimum obligations over the next five years, including the remainder of Fiscal 2017, as follows (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 36pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Fiscal Year</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Employment</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Contracts</p></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 1%; text-align: center"> </td>
<td style="width: 48%; text-align: center"><font style="font-size: 10pt">2017</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 49%; text-align: right"><font style="font-size: 10pt">506</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center"> </td>
<td style="text-align: center"><font style="font-size: 10pt">2018</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">506</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: center"> </td>
<td style="text-align: center"><font style="font-size: 10pt">2019</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: center"> </td>
<td style="text-align: center"><font style="font-size: 10pt">2020</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">-</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 10pt">2021</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: center"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">Total</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,012</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: 112.5pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 10 – Earnings (Loss) Per Share</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">Basic earnings (loss) per
share for continuing and discontinued operations are computed by dividing respective net income or loss attributable to common
stockholders by the weighted-average number of shares of our Common Stock outstanding for the period. Diluted earnings (loss) per
share reflects the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or
converted into Common Stock or resulted in the issuance of Common Stock that shared in the earnings of the entity. Diluted earnings
(loss) per share also utilize the treasury stock method which prescribes a theoretical buy-back of shares from the theoretical
proceeds of all options and warrants outstanding during the period. Options and warrants outstanding to acquire shares of our Common
Stock at March 31, 2017 and 2016 were 1,699,000 and 1,759,500, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">For the three months ended
March 31, 2017, there were 689,909 Common Stock Equivalents which were in the money, that were included in the fully diluted earnings
per share computation. For the three months ended March 31, 2017, dilutive loss per share from continuing operations is the same
as basic loss per share due to the inclusion of Common Stock, in the form of stock options and warrants (“Common Stock Equivalents”),
would have an anti-dilutive effect on the loss per share from continuing operations. For the three months ended March 31, 2016,
dilutive earnings (loss) per share is the same as basic earnings per share due to (i) the inclusion of Common Stock, in the form
of stock options and warrants (“Common Stock Equivalents”), would have an anti-dilutive effect on the loss per share
or (ii) there were no Common Stock Equivalents for the respective period. For the three months ended March 31, 2016, there were
209,559 Common Stock Equivalents which were in the money, that were excluded from the earnings (loss) per share computation as
a consequence of their anti-dilutive effect.</p>
699000
400000
1900000
4200000
2300000
1699000
1759500
48145000
5770000
3410000
2736000
2155000
680000
598000
699000
9627000
49662000
3175000
2881000
12802000
57543000
1490000
2156000
559000
2805000
1767000
389000
2807000
400000
13000
13000
56378000
56447000
-19687000
24201000
24952000
-751000
30742000
30742000
12802000
57543000
57543000
5134000
5397000
1000000
1000000
0.0005
0.0005
0.0005
0.0005
50000000
50000000
9232817
9232817
771000
1016000
686000
731000
85000
285000
115000
298000
1080000
1203000
1229000
1539000
54000
52000
-1198000
-1306000
-745000
-1306000
16925000
-17670000
1365000
-30000
44633000
-30000
27714000
16919000
-0.04
-0.08
0.99
-1.03
2.61
1.62
0.99
2.57
-0.08
2.61
-0.04
-0.04
-0.08
0.95
-0.99
2.51
1.56
0.95
2.47
-0.08
2.51
-0.04
17082000
17081000
17772000
17081000
5962000
49919000
13000
56378000
-19687000
-30742000
13000
56447000
24201000
-30742000
50670000
-751000
17080776
17131776
51000
13000
13000
-13000
-13000
43268000
26349000
16919000
323000
107000
-10000
-6000
1000
-2360000
-1312000
-581000
-259000
-82000
-1597000
572000
-1038000
-315000
2418000
397000
699000
400000
3007000
1003000
3007000
40825000
42000
210000
40783000
-210000
-1431000
42359000
793000
441000
42800000
2457000
1664000
54000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The table below sets forth
the condensed consolidated balance sheet, including the balances as originally reported, adjustments and the as restated balances
(in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">As of March 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">As originally reported</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Adjustments</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">As restated</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; padding-bottom: 1.5pt"><font style="font-size: 10pt">Income taxes payable</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,340</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">751</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2,091</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Total current liabilities</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">6,873</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">751</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">7,624</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Retained earnings</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">24,952</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(751</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">24,201</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Total stockholders' equity</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">50,670</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(751</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">49,919</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Total liabilities and stockholders' equity</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">57,543</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">57,543</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify; text-indent: 36pt">The table below sets
for the condensed consolidated statements of operations, including the balances as originally reported, adjustments, and the as
restated amounts (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">For the three months ended March 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">As originally reported</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Adjustments</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">As restated</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; padding-bottom: 1.5pt"><font style="font-size: 10pt">Income tax benefit from continuing operations</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">18,123</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(17,670</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">453</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Income (loss) from continuing operations</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">16,925</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(17,670</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(745</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Gain on sale of discontinued operations, net of taxes</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">26,349</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">16,919</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">43,268</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Income from discontinued operations</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">27,714</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">16,919</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">44,633</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Net income</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">44,639</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(751</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">43,888</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Basic earnings (loss) per share:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Income (loss) from continuing operations</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">0.99</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">(1.03</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">(0.04</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Income from discontinued operations</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1.62</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.99</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2.61</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Net income</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.61</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(0.04</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.57</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Diluted earnings (loss) per share:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Income (loss) from continuing operations</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">0.95</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">(0.99</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">(0.04</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Income from discontinued operations</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1.56</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.95</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2.51</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Net income</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.51</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(0.04</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.47</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The table below sets forth
the condensed consolidated statements of cash flows from operating activities, including the balances as originally reported, adjustments
and the as restated balances (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">For the three months ended March 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">As originally reported</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Adjustments</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">As restated</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; padding-left: 10pt"><font style="font-size: 10pt">Net income</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 10pt">44,639</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 10pt">(751</font></td>
<td style="width: 1%"><font style="font-size: 10pt">)</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 10pt">43,888</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Gain on sale of assets, net of taxes</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(26,349</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(16,919</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(43,268</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Change in valuation allowance, income tax benefit</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(18,123</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">17,670</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(453</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Net cash used in operating activities</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,007</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,007</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 2 – Restatement of Previously
Issued Financial Statements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The Company determined that
when calculating its income tax provision related to the gain on sale of discontinued operations, it incorrectly utilized available
net operating losses without considering the statutory limitations imposed by the state of Pennsylvania, and that it incorrectly
allocated the amount of income tax benefit resulting from the reversal of certain valuation allowances to continuing operations,
which resulted in an overstatement of income the tax benefit from continuing operations and an understatement of the gain on sale
of discontinued operations, which is presented net of taxes. In the process of this determination, the Company determined that
such information existed at March 31, 2017 which affected the income tax benefit/ provision from continuing and discontinued operations
reported in the three months ended March 31, 2017. The Company concluded that the impact of applying corrections for these errors
and misstatements on the consolidated financial statements as of and for the three months ended March 31, 2017 is material. As
a result, the Company is restating its consolidated financial statements as of and for the three months ended March 31, 2017. See
below for a reconciliation of the previously reported amounts to the restated amounts.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The table below sets forth
the condensed consolidated balance sheet, including the balances as originally reported, adjustments and the as restated balances
(in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">As of March 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">As originally reported</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Adjustments</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">As restated</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; padding-bottom: 1.5pt"><font style="font-size: 10pt">Income taxes payable</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,340</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">751</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2,091</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Total current liabilities</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">6,873</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">751</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">7,624</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Retained earnings</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">24,952</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(751</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">24,201</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Total stockholders' equity</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">50,670</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(751</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">49,919</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Total liabilities and stockholders' equity</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">57,543</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">57,543</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify; text-indent: 36pt">The table below sets
for the condensed consolidated statements of operations, including the balances as originally reported, adjustments, and the as
restated amounts (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">For the three months ended March 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">As originally reported</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Adjustments</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">As restated</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; padding-bottom: 1.5pt"><font style="font-size: 10pt">Income tax benefit from continuing operations</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">18,123</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(17,670</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">453</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Income (loss) from continuing operations</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">16,925</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(17,670</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(745</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Gain on sale of discontinued operations, net of taxes</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">26,349</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">16,919</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">43,268</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Income from discontinued operations</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">27,714</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">16,919</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">44,633</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Net income</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">44,639</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(751</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">43,888</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Basic earnings (loss) per share:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Income (loss) from continuing operations</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">0.99</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">(1.03</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">(0.04</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Income from discontinued operations</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1.62</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.99</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2.61</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Net income</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.61</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(0.04</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.57</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Diluted earnings (loss) per share:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Income (loss) from continuing operations</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">0.95</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">(0.99</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">(0.04</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Income from discontinued operations</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1.56</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.95</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2.51</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-size: 10pt">Net income</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.51</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(0.04</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.47</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The table below sets forth
the condensed consolidated statements of cash flows from operating activities, including the balances as originally reported, adjustments
and the as restated balances (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">For the three months ended March 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">As originally reported</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Adjustments</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">As restated</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; padding-left: 10pt"><font style="font-size: 10pt">Net income</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 10pt">44,639</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 10pt">(751</font></td>
<td style="width: 1%"><font style="font-size: 10pt">)</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 10pt">43,888</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Gain on sale of assets, net of taxes</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(26,349</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(16,919</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(43,268</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Change in valuation allowance, income tax benefit</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(18,123</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">17,670</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(453</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Net cash used in operating activities</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,007</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">-</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,007</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">The restatement had no
impact on cash flows from investing activities or financing activities or net increase in cash.</p>
The purchase price shall be set at ninety-five percent (95%) of the volume weighted average price (VWAP) of the Common Stock during the one trading day immediately following our put notice. We have the right to withdraw all or any portion of any put, except that portion of the put that has already been sold to a third party, including any portion of a put that is below the minimum acceptable price set forth on the put notice, before the closing. In the event Dutchess receives more than a five percent (5%) return on the net sales for a specific put, Dutchess must remit such excess proceeds to us; however, in the event Dutchess receives less than a five percent (5%) return on the net sales for a specific put, Dutchess will have the right to deduct from the proceeds of the put amount on the applicable closing date so Dutchess’s return will equal five percent (5%).
2450000
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">On August 10, 2018,
the Company’s management, after consultation and discussions with EisnerAmper LLP, the Company’s independent registered
public accounting firm, and the Audit Committee of the Board of Directors, concluded that the Company’s previously issued
audited condensed consolidated financial statements for the fiscal year ended December 31, 2017 included in the Company’s
Annual Report on Form 10-K for such period and unaudited condensed consolidated financial statements for the fiscal quarters
ended March 31, 2017, June 30, 2017, September 30, 2017 and March 31, 2018 (collectively with the fiscal year ended December
31, 2017, the “Restated and Revised Periods”) included in the Company’s Quarterly Reports on Form 10-Q for
such periods should no longer be relied upon, and determined that these financial statements will be restated due to the identification
of certain accounting errors related to income tax accounting.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">The Company has
determined that it miscalculated its income tax benefit by incorrectly utilizing certain net operating losses without taking into
account the statutory limitation imposed by the State of Pennsylvania, which resulted in an overstatement of net income as discussed
below. The Company also incorrectly determined the amount of income tax benefit allocable to continuing operations,
which resulted in an overstatement of income from continuing operations, and an equal understatement of the gain on sale of discontinued
operations, presented net of taxes, which had no impact on net income.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">Based on its review,
the Company has determined that its income tax expense was understated and its net income was overstated by approximately $1.2
million for the fiscal year ended December 31, 2017. Concurrently with the filing of this Form10-Q/A, the Company is filing an
amendment on Form 10-K/A to its Annual Report on Form 10-K for the fiscal year ended December 31, 2017 to restate the audited consolidated
financial statements included in the Form 10-K and amendments on Form 10-Q/A to its Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 2017, June 30, 2017, September 30, 2017 and March 31, 2018 to correct the errors described above.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">The corrections
to the Restated and Revised Periods, which we refer to herein collectively as the “Restatement”, were prepared following
an independent review by the Company.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Description of the Restatement</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">In completing our
Federal and State income tax preparation review procedures for filing of the Federal and State income tax returns for the
fiscal year ended December 31, 2017 during the second quarter of fiscal 2018, the Company identified an error in the accounting
treatment of state Net Operating Loss (NOL) limitations which resulted in the understatement of state income tax liability and
expense as of March 31, 2017 of approximately $0.8 million and a corresponding overstatement of net income for the
three months ended March 31, 2017. We also identified an error in our treatment of the reversal of certain valuation allowances
in 2017 and their allocation between continuing and discontinued operations,resulting in the overstatement of the tax benefit
allocated to continuing operations and an equal overstatement of the tax provision for discontinued operations of approximately
$16.9 million for the three months ended March 31, 2017, which had no further impact on net income.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-align: justify; text-indent: 0.5in">For additional
information regarding the corrections to the financial statements in the Restated and Revised Periods, see Notes 2, 4 and 7 of
the Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements”.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Internal Controls Over Financial
Reporting</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">As a result of the
Restatement, we also concluded that we had a material weakness related to our internal control over financial reporting. For more
information regarding management’s assessment of internal control over financial reporting and disclosure controls and procedures,
as well as the related remediation actions, refer to Item 4 “Controls and Procedures” in this Quarterly Report on Form
10-Q/A.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Items Amended by this Form 10-Q/A</i></b></p>
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">This Form 10-Q/A
amends and restates the entire contents of the original Form 10-Q. The portions of this Form 10-Q/A that have been revised to give
effect to the Restatement and matters related thereto are as follows:</p>
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<td style="font: 11pt/107% Calibri, Helvetica, Sans-Serif; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Part I, Item 1. Financial Statements</font></td></tr>
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<td style="font: 11pt/107% Calibri, Helvetica, Sans-Serif; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Part I, Item 2. Management’s Discussions and Analysis of Financial Condition and Results of Operations</font></td></tr>
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<td style="font: 11pt/107% Calibri, Helvetica, Sans-Serif; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Part I, Item 4. Controls and Procedures</font></td></tr>
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">In addition, the
Company’s Chief Executive Officer and Principal Accounting Officer have provided new certifications dated as of the date
of this filing in connection with this Form 10-Q/A.</p>
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">Except as described
above, no other changes have been made to the Company’s Quarterly Report on Form 10-Q ended March 31, 2017 (the “Original
Filing”). This Form 10-Q/A speaks as of the date of the Original Filing and does not reflect events that may have occurred
after the date of the Original Filing or modify or update any disclosures that may have been affected by subsequent events.</p>