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<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Description of Business</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">We are a biopharmaceutical company focused on
the acquisition, development and commercialization of novel treatments for B-cell malignancies and autoimmune diseases. Currently,
the Company is developing two therapies targeting hematologic malignancies. TG-1101 (ublituximab) is a novel, glycoengineered monoclonal
antibody that targets a specific and unique epitope on the CD20 antigen found on mature B-lymphocytes. We are also developing TGR-1202,
an orally available PI3K delta inhibitor. The delta isoform of PI3K is strongly expressed in cells of hematopoietic origin and
is believed to be important in the proliferation and survival of B-lymphocytes. Both TG-1101 and TGR-1202 are in clinical development
for patients with hematologic malignancies. The Company also has pre-clinical programs to develop IRAK4 (interleukin-1 receptor-associated
kinase 4) inhibitors, BET (Bromodomain and Extra Terminal) inhibitors, and anti-PD-L1 and anti-GITR antibodies.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">We also actively evaluate complementary products,
technologies and companies for in-licensing, partnership, acquisition and/or investment opportunities. To date, we have not received
approval for the sale of any of our drug candidates in any market and, therefore, have not generated any product sales from our
drug candidates.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">The accompanying unaudited condensed consolidated
financial statements were prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial
information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X of the Exchange Act. Accordingly,
they may not include all of the information and footnotes required by GAAP for complete financial statements. All adjustments that
are, in the opinion of management, of a normal recurring nature and are necessary for a fair presentation of the condensed consolidated
financial statements have been included. Nevertheless, these condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31,
2015. The accompanying condensed December 31, 2015 balance sheet has been derived from these statements. The results of operations
for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the
entire fiscal year or any other interim period.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Liquidity and Capital Resources</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">We have incurred operating losses since our
inception, expect to continue to incur operating losses for the foreseeable future and may never attain profitable operations. As of
September 30, 2016, we have an accumulated deficit of approximately $212.7 million.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Our major sources of cash have been proceeds
from the private placement and public offering of equity securities. We have not yet commercialized any of our drug
candidates and cannot be sure if we will ever be able to do so. Even if we commercialize one or more of our drug candidates,
we may not become profitable. Our ability to achieve profitability depends on many factors, including our ability to obtain
regulatory approval for our drug candidates; successfully completing any post-approval regulatory obligations; and
successfully commercializing our drug candidates alone or with one or more partners. We may continue to incur substantial
operating losses even if we begin to generate revenues from our drug candidates.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">As of September 30, 2016, we had approximately
$60.7 million in cash, cash equivalents, investment securities, and interest receivable, which we believe will be sufficient to
fund the company’s planned operations into the first half of 2018. The actual amount of cash that we will need to operate is subject to many factors, including, but not limited to, the
timing, design and conduct of clinical trials for our drug candidates. We are dependent upon significant future financing to provide
the cash necessary to execute our current strategic plan, including the commercialization of any of our drug candidates.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Our common stock is listed on the Nasdaq Capital
Market and trades under the symbol “TGTX.” </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Recently Issued Accounting Standards</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 45pt">In August 2016, the Financial
Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2016-15, “Classification
of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 amends the guidance in Accounting Standards
Codification (“ASC” or “Codification”) 230 on the classification of certain cash receipts and payments
in the statement of cash flows. The primary purpose of ASU 2016-15 is to reduce the diversity in practice that has resulted from
the lack of consistent principles on this topic. The amendments in ASU 2016-15 add or clarify guidance on eight cash flow issues:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellpadding="0" style="width: 100%">
<tr>
<td style="vertical-align: top; font: 12pt Times New Roman, Times, Serif; padding: 0.75pt"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; font: 12pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">Debt prepayment or debt extinguishment costs.</font></td></tr>
<tr>
<td style="vertical-align: top; font: 12pt Times New Roman, Times, Serif; padding: 0.75pt"><font style="font-size: 8pt">●</font></td>
<td colspan="2" style="padding: 0.75pt; font: 12pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">Settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing.</font></td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellpadding="0" style="width: 100%; font: 12pt Times New Roman, Times, Serif">
<tr>
<td style="vertical-align: top; padding: 0.75pt"><font style="font-size: 8pt">●</font></td>
<td colspan="2" style="padding: 0.75pt; text-align: justify"><font style="font-size: 8pt">Contingent consideration payments made after a business combination.</font></td></tr>
<tr>
<td style="vertical-align: top; padding: 0.75pt"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; text-align: justify"><font style="font-size: 8pt">Proceeds from the settlement of insurance claims.</font></td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellpadding="0" style="width: 100%; font: 12pt Times New Roman, Times, Serif">
<tr>
<td style="vertical-align: top; padding: 0.75pt"><font style="font-size: 8pt">●</font></td>
<td colspan="2" style="padding: 0.75pt; text-align: justify"><font style="font-size: 8pt">Proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies.</font></td></tr>
<tr>
<td style="vertical-align: top; padding: 0.75pt"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; text-align: justify"><font style="font-size: 8pt">Distributions received from equity method investees.</font></td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellpadding="0" style="width: 100%; font: 12pt Times New Roman, Times, Serif">
<tr>
<td style="vertical-align: top; padding: 0.75pt"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; text-align: justify"><font style="font-size: 8pt">Beneficial interests in securitization transactions.</font></td></tr>
<tr>
<td style="vertical-align: top; padding: 0.75pt"><font style="font-size: 8pt">●</font></td>
<td colspan="2" style="padding: 0.75pt; text-align: justify"><font style="font-size: 8pt">Separately identifiable cash flows and application of the predominance principle.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 45pt">ASU 2016-15 is effective
for annual and interim periods beginning after December 15, 2017, and early adoption is permitted for all entities. Entities must
apply the guidance retrospectively to all periods presented but may apply it prospectively from the earliest date practicable if
retrospective application would be impracticable. The provisions of this standard are not expected to significantly impact the
Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 45pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 45pt">In May 2016, the FASB issued
ASU No. 2016-11, “Rescission of SEC Guidance Because of Accounting Standards Update 2014-09 and 2014-16 Pursuant to Staff
Announcements at the March 3, 2016 EITF Meeting” (“ASU 2016-11”). ASU 2016-11 rescinds certain SEC guidance from
the <i>FASB Codification</i> in response to announcements made by the SEC staff at the Emerging Issues Task Force’s March
3, 2016 meeting. Specifically, ASU 2016-11 supersedes SEC observer comments on the following topics:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 0 -20pt; text-indent: 0.5in">           
  ● Upon the adoption of ASU 2014-09:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 63pt">o Revenue and expense recognition for freight
services in process (ASC 605-20-S99-2)</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 63pt">o Accounting for shipping and handling fees and
costs (ASC 605-45-S99-1)</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 63pt">o Accounting for consideration given by a vendor
to a customer (ASC 605-50-S99-1)</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 63pt">o Accounting for gas-balancing arrangements (ASC
932-10-S99-5).</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt">     
        ● Upon the adoption of ASU 2014-16:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 0 60pt; text-indent: 0pt">o Determining the nature of a host contract related
to a hybrid financial instrument issued in the form of a share under ASC 815 (ASC 815-10-S99-3). </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">ASU 2016-11 is effective upon the adoption of
ASU 2014-09 and ASU 2014-16. The adoption of ASU 2016-11 is not expected to have a material impact on the Company’s condensed
consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">In March 2016, the FASB issued ASU No. 2016-09,
“Simplifying the Accounting for Share-Based Payments” (“ASU 2016-09”). ASU 2016-09 simplifies several aspects
of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting
for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows.
ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those
annual reporting periods. The provisions of this standard are not expected to significantly impact the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Other pronouncements issued by the FASB or other
authoritative accounting standards group with future effective dates are either not applicable or not significant to our consolidated
financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Use of Estimates</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">The preparation of financial statements in conformity
with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the applicable reporting period. Actual results could differ from those estimates. Such differences could be material
to the consolidated financial statements. </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Cash and Cash Equivalents</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 45pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">We treat liquid investments with original maturities
of three months or less when purchased as cash and cash equivalents.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Restricted Cash</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">We record cash pledged or held in trust as restricted
cash. As of September 30, 2016 and December 31, 2015, we have approximately $0.6 million of restricted cash pledged to secure a
line of credit as a security deposit for an <font style="background-color: white">Office Agreement</font> (see Note 8).</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Investment Securities</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Investment securities at September 30, 2016 and
December 31, 2015 consist of short-term and long-term government securities. We classify these securities as held-to-maturity.
Held-to-maturity securities are those securities in which we have the ability and intent to hold the security until maturity. Held-to-maturity
securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Premiums and discounts
are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective
interest method.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">A decline in the market value of any investment
security below cost, that is deemed to be other than temporary, results in a reduction in the carrying amount to fair value. The
impairment is charged to operations and a new cost basis for the security is established. Other-than-temporary impairment charges
would be included in interest and other (income) expense, net. Dividend and interest income are recognized when earned.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Credit Risk</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Financial instruments that potentially subject
the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and long-term
investments. The Company maintains its cash and cash equivalents, short-term investments and long-term investments with high-credit
quality financial institutions. At times, such amounts may exceed federally-insured limits.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Revenue Recognition</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">We recognize license revenue in accordance with
the revenue recognition guidance of the FASB Codification. We analyze each element of our licensing agreement to determine the
appropriate revenue recognition. The terms of the license agreement may include payments to us of non-refundable up-front license
fees, milestone payments if specified objectives are achieved, and/or royalties on product sales. We recognize revenue from upfront
payments over the period of significant involvement under the related agreements unless the fee is in exchange for products delivered
or services rendered that represent the culmination of a separate earnings process and no further performance obligation exists
under the contract. We recognize milestone payments as revenue upon the achievement of specified milestones only if (1) the milestone
payment is non-refundable, (2) substantive effort is involved in achieving the milestone, (3) the amount of the milestone is reasonable
in relation to the effort expended or the risk associated with achievement of the milestone, and (4) the milestone is at risk for
both parties. If any of these conditions are not met, we defer the milestone payment and recognize it as revenue over the estimated
period of performance under the contract.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Research and Development Costs</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 45pt">Generally, research and development
costs are expensed as incurred. Non-refundable advance payments for goods or services that will be used or rendered for future
research and development activities are deferred and amortized over the period that the goods are delivered or the related services
are performed, subject to an assessment of recoverability. We make estimates of costs incurred in relation to external clinical
research organizations, or CROs, and clinical site costs. We analyze the progress of clinical trials, including levels of patient
enrollment, invoices received and contracted costs when evaluating the adequacy of the amount expensed and the related prepaid
asset and accrued liability. Significant judgments and estimates must be made and used in determining the accrued liability balance
and expense in any accounting period. We review and accrue CRO expenses and clinical trial study expenses based on work performed
and rely upon estimates of those costs applicable to the stage of completion of a study. Accrued CRO costs are subject to revisions
as such trials progress to completion. Revisions are charged to expense in the period in which the facts that give rise to the
revision become known. With respect to clinical site costs, the financial terms of these agreements are subject to negotiation
and vary from contract to contract. Payments under these contracts may be uneven, and depend on factors such as the achievement
of certain events, the successful recruitment of patients, the completion of portions of the clinical trial or similar conditions.
The objective of our policy is to match the recording of expenses in our financial statements to the actual services received and
efforts expended. As such, expense accruals related to clinical site costs are recognized based on our estimate of the degree of
completion of the event or events specified in the specific clinical study or trial contract.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt"><br />
                    Prepaid research and development
in our consolidated balance sheets includes, among other things, certain costs related to development and manufacturing services.
These development and manufacturing agreements often require payments in advance of services performed or goods received. Accordingly,
as of September 30, 2016 and December 31, 2015, we recorded approximately $10.1 million and $9.2 million of prepaid development
and manufacturing services, respectively, in prepaid research and development related to such advance agreements. </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Income Taxes</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Income taxes are accounted for under the asset
and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases,
operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment
date. If the likelihood of realizing the deferred tax assets or liability is less than “more likely than not,” a valuation
allowance is then created.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Stock-Based Compensation</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">We recognize all share-based payments to employees
and non-employee directors (as compensation for service) as noncash compensation expense in the condensed consolidated financial
statements based on the fair values of such payments. Stock-based compensation expense recognized each period is based on the value
of the portion of share-based payment awards that is ultimately expected to vest during the period. Forfeitures are estimated at
the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">For share-based payments to consultants and other
third-parties (including related parties), noncash compensation expense is determined at the “measurement date.” The
expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation
expense remains uncertain. We record compensation expense based on the fair value of the award at the reporting date. The awards
to consultants and other third-parties (including related parties) are then revalued, or the total compensation is recalculated
based on the then current fair value, at each subsequent reporting date.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">In addition, because some of the options, restricted
stock and warrants issued to employees, consultants and other third-parties vest upon achievement of certain milestones, the total
expense is uncertain. Compensation expense for such awards that vest upon the achievement of milestones is recognized when the
achievement of such milestones becomes probable.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Basic and Diluted Net Loss Per Common Share</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Basic net loss per share of our common stock is
calculated by dividing net loss applicable to the common stock by the weighted-average number of our common stock outstanding for
the period. Diluted net loss per share of common stock is the same as basic net loss per share of common stock since potentially
dilutive securities from stock options, stock warrants and convertible preferred stock would have an antidilutive effect either
because we incurred a net loss during the period presented or because such potentially dilutive securities were out of the money
and the Company realized net income during the period presented. The amounts of potentially dilutive securities excluded from the
calculation were 6,664,591 and 5,634,005 for the three and nine months ended September 30, 2016 and 2015, respectively. The following
outstanding shares of potentially dilutive securities were excluded from the computation of net loss per share attributable to
common stockholders for the periods presented because including them would have been antidilutive:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Three and Nine Months Ended September 30,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>2015</b></font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%; text-indent: 9pt"><font style="font-size: 8pt">Unvested restricted stock</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">5,507,250</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">4,404,805</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Warrants</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,142,208</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,211,177</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Shares issuable upon note conversion</font></td>
<td> </td>
<td style="border-bottom: Black 1.5pt solid"> </td>
<td style="text-align: right; border-bottom: Black 1.5pt solid"><font style="font-size: 8pt">15,133</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: Black 1.5pt solid"> </td>
<td style="text-align: right; border-bottom: Black 1.5pt solid"><font style="font-size: 8pt">18,023</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">6,664,591</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">5,634,005</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Long-Lived Assets and Goodwill</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Long-lived assets are reviewed for potential impairment
when circumstances indicate that the carrying value of long-lived tangible and intangible assets with finite lives may not be recoverable.
Management’s policy in determining whether an impairment indicator exists, a triggering event, comprises measurable operating
performance criteria as well as qualitative measures. If an analysis is necessitated by the occurrence of a triggering event, we
make certain assumptions in determining the impairment amount. If the carrying amount of an asset exceeds its estimated future
cash flows, an impairment charge is recognized.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Goodwill is reviewed for impairment annually,
or earlier when events arise that could indicate that an impairment exists. We test for goodwill impairment using a two-step process.
The first step compares the fair value of the reporting unit with the unit's carrying value, including goodwill. When the carrying
value of the reporting unit is greater than fair value, the unit’s goodwill may be impaired, and the second step must be
completed to measure the amount of the goodwill impairment charge, if any. In the second step, the implied fair value of the reporting
unit’s goodwill is compared with the carrying amount of the unit’s goodwill. If the carrying amount is greater than
the implied fair value, the carrying value of the goodwill must be written down to its implied fair value. We will continue to
perform impairment tests annually, at December 31, and whenever events or changes in circumstances suggest that the carrying value
of an asset may not be recoverable.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">The following tables summarize our cash and cash
equivalents at September 30, 2016 and December 31, 2015:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>September 30, 2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>December 31, 2015</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 70%; text-indent: 9pt"><font style="font-size: 8pt">Money market funds</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 12%; text-align: right"><font style="font-size: 8pt">24,316,496</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 12%; text-align: right"><font style="font-size: 8pt">8,265,583</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Checking and bank deposits</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">4,840,025</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">46,795,746</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">29,156,521</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">55,061,329</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Our investments as of September 30, 2016 and December
31, 2015 are classified as held-to-maturity. Held-to-maturity investments are recorded at amortized cost. During the three months
ended September 30, 2016, we liquidated our long-term investment securities with a net carrying amount of approximately $12.6 million,
realizing a gain of approximately $33,000 on the sale. The decision to sell our long-term securities was made due to market rate
conditions on long-term securities coupled with the recognized gain we were able to yield on the sale of the securities.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">The following tables summarize our investment
securities at September 30, 2016 and December 31, 2015:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="14" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>September 30, 2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Amortized cost, as adjusted</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Gross unrealized holding gains</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>Gross unrealized holding losses</b></font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>Estimated fair value</b></font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Short-term investments:</font></td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%; text-indent: 9pt"><font style="font-size: 8pt">Obligations of domestic governmental agencies (maturing between October 2016 and September 2017) (held-to-maturity)</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">31,445,616</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">19,363</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">31,464,979</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Total short-term investment securities</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">31,445,616</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">19,363</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">31,464,979</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="14" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>December 31, 2015</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Amortized cost, as adjusted</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Gross unrealized holding gains</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>Gross unrealized holding losses</b></font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>Estimated fair value</b></font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Short-term investments:</font></td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%; text-indent: 9pt"><font style="font-size: 8pt">Obligations of domestic governmental agencies (maturing between January 2016 and December 2016) (held-to-maturity)</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">22,166,512</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">22,822</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">22,143,690</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </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>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify; text-indent: 9pt"><font style="font-size: 8pt">Long-term investments:</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>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Obligations of domestic governmental agencies (maturing between January 2017 and December 2017) (held-to-maturity)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">25,003,032</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">85,846</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">24,917,186</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Total short-term and long-term investment securities</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">47,169,544</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">108,668</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">47,060,876</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in">We measure certain financial assets and liabilities
at fair value on a recurring basis in the condensed consolidated financial statements. The fair value hierarchy ranks the quality
and reliability of inputs, or assumptions, used in the determination of fair value and requires financial assets and liabilities
carried at fair value to be classified and disclosed in one of the following three categories:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellpadding="0" style="width: 100%">
<tr>
<td style="vertical-align: top; width: 72px; padding: 0.75pt; font: 12pt Times New Roman, Times, Serif"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; font: 12pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">Level 1 – quoted prices in active markets for identical assets and liabilities;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellpadding="0" style="width: 100%">
<tr>
<td style="vertical-align: top; width: 72px; padding: 0.75pt; font: 12pt Times New Roman, Times, Serif"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; font: 12pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">Level 2 – inputs other than Level 1 quoted prices that are directly or indirectly observable; and</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellpadding="0" style="width: 100%">
<tr>
<td style="vertical-align: top; width: 72px; padding: 0.75pt; font: 12pt Times New Roman, Times, Serif"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; font: 12pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">Level 3 – unobservable inputs that are not corroborated by market data.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">As of September 30, 2016 and December 31, 2015,
the fair values of cash and cash equivalents, restricted cash, and notes and interest payable, approximate their
carrying value.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="background-color: white">At the
time of our merger (we were then known as Manhattan Pharmaceuticals, Inc.) with Ariston Pharmaceuticals, Inc. (“Ariston”)
in March 2010, Ariston issued $15.5 million of five-year 5% notes payable (the “5% Notes”) in satisfaction of several
note payable issuances. The 5% Notes and accrued and unpaid interest thereon are convertible at the option of the holder into common
stock at the conversion price of $1,125 per share. Ariston agreed to make quarterly payments on the 5% Notes equal to 50% of the
net product cash flow received from the exploitation or commercialization of Ariston’s product candidates, AST-726 and AST-915.
We have no obligations under the 5% Notes aside from (a) 50% of the net product cash flows from Ariston’s product candidates,
if any, payable to noteholders; and (b) the conversion feature, discussed above.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="background-color: white">The
cumulative liability to the Ariston subsidiary including accrued and unpaid interest of the 5% Notes was approximately $17.0
million at September 30, 2016 and $19.9 million at December 31, 2015.</font> No payments have been made on the 5% Notes as of
September 30, 2016.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">In December 2011, we elected the fair value option
for valuing the 5% Notes. The fair value option was elected in order to reflect in our financial statements the assumptions that
market participants use in evaluating these financial instruments.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">As of December 31, 2013, as a result of expiring
intellectual property rights and other factors, it was determined that net product cash flows from AST-726 were unlikely. As we
have no other obligations under the 5% Notes aside from the net product cash flows and the conversion feature, the conversion feature
was used to estimate the 5% Notes’ fair value as of September 30, 2016 and December 31, 2015. The assumptions, assessments
and projections of future revenues are subject to uncertainties, difficult to predict, and require significant judgment. The use
of different assumptions, applying different judgment to inherently subjective matters and changes in future market conditions
could result in significantly different estimates of fair value and the differences could be material to our condensed consolidated
financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The following tables provide the fair value measurements
of applicable financial liabilities as of September 30, 2016 and December 31, 2015:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="14" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Financial liabilities at fair value as of September 30, 2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Level 1</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Level 2</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Level 3</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Total</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%; text-indent: 9pt"><font style="font-size: 8pt">5% Notes</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 0%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 0%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 0%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 0%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="14" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Financial liabilities at fair value as of December 31, 2015</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Level 1</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Level 2</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Level 3</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Total</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%; text-indent: 9pt"><font style="font-size: 8pt">5% Notes</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 0%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 0%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 0%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 0%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Level 3 amounts above represent the fair
value of the 5% Notes and related accrued interest.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The following table summarizes the changes in
Level 3 instruments during the nine months ended September 30, 2016:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="width: 88%; text-indent: 9pt"><font style="font-size: 8pt">Fair value at December 31, 2015</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Interest accrued on face value of 5% Notes</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">674,699</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Conversion of 5% notes</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(30,601</font></td>
<td><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Change in fair value of Level 3 liabilities</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">(738,521</font></td>
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Fair value at September 30, 2016</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The change in the fair value of the Level 3 liabilities
is reported in other (income) expense in the accompanying condensed consolidated statements of operations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Preferred Stock</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Our amended and restated certificate of incorporation
authorizes the issuance of up to 10,000,000 shares of preferred stock, $0.001 par value, with rights senior to those of our common
stock, <font style="background-color: white">issuable in one or more series. Upon issuance, we can determine the rights, preferences,
privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights,
voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series
or the designation of such series, any or all of which may be greater than the rights of common stock.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Common Stock</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Our amended and restated certificate of incorporation
authorizes the issuance of up to 150,000,000 shares of $0.001 par value common stock.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="background-color: white">In December
2014, we filed a shelf registration statement on Form S-3 (the “2015 S-3”), which was declared effective in January
2015. Under the 2015 S-3, the Company may sell up to a total of $250 million of its securities. In connection with the 2015 S-3,
we amended our 2013 At-the-Market Issuance Sales Agreement with MLV & Co. LLC (the “2015 ATM”) such that we may
issue and sell additional shares of our common stock, having an aggregate offering price of up to $175.0 million, from time to
time through MLV & Co. LLC (“MLV”) and FBR Capital Markets & Co. (“FBR”, each of MLV and FBR individually
an “Agent” and collectively the “Agents”), acting as the sales agents. Under the 2015 ATM we pay the Agents
a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock sold through the Agents.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="background-color: white">In April
and May of 2016, we sold a total of 396,811 shares of common stock under the 2015 ATM for aggregate total gross proceeds of approximately
$3.6 million at an average selling price of $9.00 per share, resulting in net proceeds of approximately $3.5 million after deducting
commissions and other transaction costs.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="background-color: white">The
2015 S-3 is currently our only active shelf registration statement. After deducting shares already sold, including under the
2015 ATM, there is approximately $178 million of common stock that remains available for sale under the 2015 S-3. We may
offer the securities under the 2015 S-3 from time to time in response to market conditions or other circumstances if we
believe such a plan of financing is in the best interests of our stockholders. We believe that the 2015 S-3 provides us with
the flexibility to raise additional capital to finance our operations as needed.</font> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Equity Incentive Plans</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The TG Therapeutics, Inc. Amended and Restated
2012 Incentive Plan (“2012 Incentive Plan”) was approved by stockholders in June 2015. As of September 30, 2016, no
options were outstanding and up to an additional 3,938,403 shares may be issued under the 2012 Incentive Plan.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><u>Restricted Stock</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Certain employees, directors and consultants
have been awarded restricted stock. The restricted stock vesting consists of milestone and time-based vesting. The following table
summarizes restricted share activity for the nine months ended September 30, 2016:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Number of Shares</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Weighted Average Grant Date Fair Value</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 72%; text-indent: 9pt"><font style="font-size: 8pt">Outstanding at December 31, 2015</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"><font style="font-size: 8pt">7,359,915</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 11%; text-align: right"><font style="font-size: 8pt">7.83</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">261,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">7.13</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Vested</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(578,892</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">7.13</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Forfeited</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">(34,773</font></td>
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 3pt"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">11.83</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Outstanding at September 30, 2016</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">7,007,250</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">7.82</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Total expense associated with restricted stock
grants was approximately $2.8 million and $1.2 million during the three months ended September 30, 2016 and 2015, respectively,
and $6.2 million and $12.8 million during the nine months ended September 30, 2016 and 2015, respectively. As of September 30,
2016, there was approximately $15.8 million of total unrecognized compensation cost related to unvested time-based restricted stock,
which is expected to be recognized over a weighted-average period of 1.64 years. This amount does not include, as of September
30, 2016, 411,172 shares of restricted stock outstanding which are milestone-based and vest upon certain corporate milestones;
and 2,306,958 shares of restricted stock outstanding issued to non-employees, the expense for which is determined each reporting
period at the measurement date. The expense is recognized over the vesting period of the award. Until the measurement date is reached
for milestone awards, the total amount of compensation expense remains uncertain. We record compensation expense based on the fair
value of the award at the reporting date.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><u>Warrants</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The following table summarizes warrant activity
for the nine months ended September 30, 2016:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Warrants</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Weighted average
exercise price</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Aggregate Intrinsic Value</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 62%; text-indent: 9pt"><font style="font-size: 8pt">Outstanding at December 31, 2015</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 9%; padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">1,186,749</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"><font style="font-size: 8pt">$</font></td>
<td style="width: 10%; padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">2.37</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 10%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">11,341,452</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Issued</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">--</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">--</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Exercised</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(44,541</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2.26</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Expired</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">--</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: 8pt">--</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"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Outstanding at September 30, 2016</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">1,142,208</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">2.38</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">6,125,109</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Stock-Based Compensation</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt">We did not grant any stock options during the
nine months ended September 30, 2016 and 2015.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt">The following table summarizes stock-based compensation
expense information about restricted stock and stock options for the three and nine months ended September 30, 2016 and 2015:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>Three months ended September 30,</b></font></td>
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>Nine months ended September 30,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>2015</b></font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>2015</b></font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 40%; text-indent: 9pt"><font style="font-size: 8pt">Stock-based compensation expense associated with restricted stock</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 11%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">2,834,038</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 11%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">1,240,034</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 11%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">6,181,400</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 11%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">12,840,048</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">2,834,038</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">1,240,034</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">6,181,400</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">12,840,048</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The following is a summary of notes payable:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="10" style="padding-bottom: 1.5pt; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt"> <b>September 30, 2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td colspan="10" style="text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt"><b>December 31</b>, <b>2015</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Current portion, net</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Non-current portion, net</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Total</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Current portion, net</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Non-current portion, net</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Total</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 28%; text-indent: 9pt"><font style="font-size: 8pt">Convertible 5% Notes Payable</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Convertible 5% Notes Payable</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt">The 5% Notes and accrued and unpaid interest thereon
are convertible at the option of the holder into common stock at the conversion price of $1,125 per share. <font style="background-color: white">We
have no obligation under the 5% Notes aside from (a) 50% of the net product cash flows from Ariston’s product candidates,
if any, payable to noteholders; and (b) the conversion feature, discussed above.</font> Interest accrues monthly, is added to principal
on an annual basis, every March 8, and is payable at maturity, which was March 8, 2015 (see Note 4 for further details).</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt"><font style="background-color: white">The cumulative
liability including accrued and unpaid interest of these notes was approximately $17.0 million at September 30, 2016 and $19.9
million at December 31, 2015.</font> No payments have been made on the 5% Notes as of September 30, 2016.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt">In December 2011, we elected the fair value option
for valuing the 5% Notes. The fair value option was elected in order to reflect in our financial statements the assumptions that
market participants use in evaluating these financial instruments (see Note 4 for further details).</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>BET</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt">In May 2016, as part of a broader agreement with
Jubilant Biosys (“Jubilant”), an India-based biotechnology company, we entered into a sub-license agreement (“JBET
Agreement”) with Checkpoint Therapeutics, Inc. (“Checkpoint”), (see Note 8), for the development and commercialization
of Jubilant’s novel BET inhibitor program in the field of hematological malignancies.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt">Under the terms of the agreement, we paid Checkpoint
an up-front licensing fee of $1.0 million and will make additional payments contingent on certain preclinical, clinical, and regulatory
milestones, including commercial milestones totaling up to approximately $177 million and a single-digit royalty on net sales.
TG will also provide funding to support certain targeted research efforts at Jubilant.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>TG-1101</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt">In November 2012, we entered into an exclusive
(within the territory) sublicense agreement with Ildong relating to the development and commercialization of TG-1101 in South Korea
and Southeast Asia. Under the terms of the sublicense agreement, Ildong has been granted a royalty bearing, exclusive right, including
the right to grant sublicenses, to develop and commercialize TG-1101 in South Korea, Taiwan, Singapore, Indonesia, Malaysia, Thailand,
Philippines, Vietnam, and Myanmar.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt">An upfront payment of $2.0 million, which
was received in December 2012 (<font style="background-color: white">net of $0.3 million of income tax withholdings</font>),
is recognized as license revenue on a straight-line basis over the life of the agreement, which is through the expiration of
the last licensed patent right or 15 years after the first commercial sale of a product in such country, unless the agreement
is earlier terminated, and represents the estimated period over which we will have certain ongoing responsibilities under the
sublicense agreement. We recorded license revenue of approximately $38,000 for each of the three months ended September 30,
2016 and 2015, and approximately $0.1 million for each of the nine months ended September 30, 2016 and 2015 and, at September
30, 2016 and December 31, 2015, have deferred revenue of approximately $1.4 million and $1.5 million, respectively,
associated with this $2.0 million payment (approximately $0.2 million of which has been classified in current liabilities at
September 30, 2016 and December 31, 2015).</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27pt">We may receive up to an additional
$5.0 million in payments upon the achievement of pre-specified milestones. In addition, upon commercialization, Ildong will make
royalty payments to us on net sales of TG-1101 in the sublicense territory.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>LFB Biotechnologies</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt">On January 30, 2012, we entered into an
exclusive license agreement with LFB Biotechnologies, GTC Biotherapeutics and LFB/GTC LLC, all wholly-owned subsidiaries of
LFB Group, relating to the development of ublituximab (the “LFB License Agreement”). In connection with the LFB
License Agreement, LFB Group was issued 5,000,000 shares of common stock, and a warrant to purchase 2,500,000 shares of
common stock at a purchase price of $0.001 per share. In addition, on November 9, 2012, we nominated Dr. Yann Echelard to our
Board of Directors as LFB Group’s nominee. LFB Group maintains the right to nominate a board member until such time as
LFB Group owns less than 10% of the outstanding common stock.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt">Under the terms of the LFB License Agreement,
we utilize LFB Group for certain development and manufacturing services. We incurred expenses of $1.9 million and $2.5 million
during the three months ended September 30, 2016 and 2015, respectively, and $4.3 million and $4.9 million during the nine months
ended September 30, 2016 and 2015, respectively, which have been included in other research and development expenses in the accompanying
condensed consolidated statements of operations. As of September 30, 2016 and December 31, 2015, we had approximately $0.3 million
and $2.1 million, respectively, recorded in accounts payable related to the LFB License Agreement. In conjunction with the development
and manufacturing services discussed above, certain agreements between us and LFB Group require payments in advance of services
performed or goods delivered. Accordingly, as of September 30, 2016 and December 31, 2015, we recorded approximately $3.1 million
and $3.0 million, respectively, in prepaid research and development for such advance payments.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Other Parties</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt">In March 2014, we entered into a shared services
agreement (the “Opus Shared Services Agreement”) with Opus Point Partners Management, LLC (“Opus”) in which
the parties agreed to share the costs of a rented facility and certain other services. Our Executive Chairman and Interim Chief
Executive Officer is a Managing Member of Opus. During the three and nine months ended September 30, 2016, we incurred expenses
of approximately $0 and $0.1 million, respectively, principally for rent, related to this agreement. The Opus Shared Services Agreement
is no longer in effect as we began occupying new space in April 2016.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><font style="background-color: white">In October
2014, we entered into an agreement (the “Office Agreement”) with Fortress Biotech, Inc. (“Fortress”), to
occupy approximately 45% of the 24,000 square feet of New York City office space leased by Fortress, which is now our corporate
headquarters. The Office Agreement requires us to pay our respective share of the average annual rent and other costs of the 15-year
lease. We approximate an average annual rental obligation of $1.1 million under the Office Agreement. We began to occupy this new
space in April 2016, with rental payments beginning in the third quarter of 2016. During the nine months ended September 30, 2016,
we recorded rent expense of approximately $1.0 million and</font> at September 30, 2016, have deferred rent of approximately $0.8
million<font style="background-color: white">. Mr. Weiss, our Executive Chairman and Interim CEO, is also Executive Vice Chairman
of Fortress.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">During the nine months ended September 30,
2016, <font style="background-color: white">we agreed to pay Fortress $2.7 million for our portion of the build out
costs,</font> which have been allocated to us at the 45% rate mentioned above. The allocated build-out costs have been
recorded in Leasehold Interest and will be amortized over the 15-year term of the Office Agreement. After an initial
commitment period of the 45% for a period of three (3) years, we and Fortress will determine actual office space
utilization annually and if our utilization differs from the amount we have been billed, we will either receive credits or be
assessed incremental utilization charges. <font style="background-color: white">As of September 30, 2016, we had
approximately $0.4</font> million recorded in accounts payable related mostly to the upfront leasehold interest. <font style="background-color: white">Also
in connection with this lease, in October 2014 we pledged $0.6 million to secure a line of credit as a security deposit
for the Office Agreement, which has been recorded as restricted cash in the accompanying condensed consolidated balance
sheets.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="background-color: white">In July
2015, we entered into a Shared Services Agreement (the “Shared Services Agreement”) with Fortress to share the cost
of certain services such as facilities use, personnel costs and other overhead and administrative costs. This Shared Services Agreement
requires us to pay our respective share of services utilized. In connection with the Shared Services Agreement, we</font> incurred
expenses of <font style="background-color: white">approximately $0.5 million for shared services for the nine months ended September
30, 2016, primarily related to shared personnel.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">In May 2016, as part of a broader agreement with
Jubilant, an India-based biotechnology company, we entered into the JBET Agreement with Checkpoint, a subsidiary of Fortress, for
the development and commercialization of Jubilant’s novel BET inhibitor program in the field of hematological malignancies.
We paid Checkpoint an up-front licensing fee of $1.0 million as part of the JBET Agreement. As of September 30, 2016, we had approximately
$0.3 million recorded in accounts payable, related to the JBET Agreement. Mr. Weiss is also the Executive Chairman of Checkpoint.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">We are a biopharmaceutical company focused on
the acquisition, development and commercialization of novel treatments for B-cell malignancies and autoimmune diseases. Currently,
the Company is developing two therapies targeting hematologic malignancies. TG-1101 (ublituximab) is a novel, glycoengineered monoclonal
antibody that targets a specific and unique epitope on the CD20 antigen found on mature B-lymphocytes. We are also developing TGR-1202,
an orally available PI3K delta inhibitor. The delta isoform of PI3K is strongly expressed in cells of hematopoietic origin and
is believed to be important in the proliferation and survival of B-lymphocytes. Both TG-1101 and TGR-1202 are in clinical development
for patients with hematologic malignancies. The Company also has pre-clinical programs to develop IRAK4 (interleukin-1 receptor-associated
kinase 4) inhibitors, BET (Bromodomain and Extra Terminal) inhibitors, and anti-PD-L1 and anti-GITR antibodies.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">We also actively evaluate complementary products,
technologies and companies for in-licensing, partnership, acquisition and/or investment opportunities. To date, we have not received
approval for the sale of any of our drug candidates in any market and, therefore, have not generated any product sales from our
drug candidates.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">The accompanying unaudited condensed consolidated
financial statements were prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial
information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X of the Exchange Act. Accordingly,
they may not include all of the information and footnotes required by GAAP for complete financial statements. All adjustments that
are, in the opinion of management, of a normal recurring nature and are necessary for a fair presentation of the condensed consolidated
financial statements have been included. Nevertheless, these condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31,
2015. The accompanying condensed December 31, 2015 balance sheet has been derived from these statements. The results of operations
for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the
entire fiscal year or any other interim period.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt"><font style="font: 8pt Times New Roman, Times, Serif">We
have incurred operating losses since our inception, expect to continue to incur operating losses for the foreseeable future and
may never attain profitable operations. As of September 30, 2016, we have an accumulated deficit of approximately $212.7 million.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt"><font style="font: 8pt Times New Roman, Times, Serif">Our
major sources of cash have been proceeds from the private placement and public offering of equity securities. We have not yet
commercialized any of our drug candidates and cannot be sure if we will ever be able to do so. Even if we commercialize one or
more of our drug candidates, we may not become profitable. Our ability to achieve profitability depends on many factors, including
our ability to obtain regulatory approval for our drug candidates; successfully completing any post-approval regulatory obligations;
and successfully commercializing our drug candidates alone or with one or more partners. We may continue to incur substantial
operating losses even if we begin to generate revenues from our drug candidates.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt"><font style="font: 8pt Times New Roman, Times, Serif">As
of September 30, 2016, we had approximately $60.7 million in cash, cash equivalents, investment securities, and interest receivable,
which we believe will be sufficient to fund the company’s planned operations into the first half of 2018. The actual amount
of cash that we will need to operate is subject to many factors, including, but not limited to, the timing, design and conduct
of clinical trials for our drug candidates. We are dependent upon significant future financing to provide the cash necessary to
execute our current strategic plan, including the commercialization of any of our drug candidates.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt"><font style="font: 8pt Times New Roman, Times, Serif">Our
common stock is listed on the Nasdaq Capital Market and trades under the symbol “TGTX.” </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 45pt">In August 2016, the Financial
Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2016-15, “Classification
of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 amends the guidance in Accounting Standards
Codification (“ASC” or “Codification”) 230 on the classification of certain cash receipts and payments
in the statement of cash flows. The primary purpose of ASU 2016-15 is to reduce the diversity in practice that has resulted from
the lack of consistent principles on this topic. The amendments in ASU 2016-15 add or clarify guidance on eight cash flow issues:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellpadding="0" style="width: 100%">
<tr>
<td style="vertical-align: top; font: 12pt Times New Roman, Times, Serif; padding: 0.75pt"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; font: 12pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">Debt prepayment or debt extinguishment costs.</font></td></tr>
<tr>
<td style="vertical-align: top; font: 12pt Times New Roman, Times, Serif; padding: 0.75pt"><font style="font-size: 8pt">●</font></td>
<td colspan="2" style="padding: 0.75pt; font: 12pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">Settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing.</font></td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellpadding="0" style="width: 100%; font: 12pt Times New Roman, Times, Serif">
<tr>
<td style="vertical-align: top; padding: 0.75pt"><font style="font-size: 8pt">●</font></td>
<td colspan="2" style="padding: 0.75pt; text-align: justify"><font style="font-size: 8pt">Contingent consideration payments made after a business combination.</font></td></tr>
<tr>
<td style="vertical-align: top; padding: 0.75pt"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; text-align: justify"><font style="font-size: 8pt">Proceeds from the settlement of insurance claims.</font></td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellpadding="0" style="width: 100%; font: 12pt Times New Roman, Times, Serif">
<tr>
<td style="vertical-align: top; padding: 0.75pt"><font style="font-size: 8pt">●</font></td>
<td colspan="2" style="padding: 0.75pt; text-align: justify"><font style="font-size: 8pt">Proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies.</font></td></tr>
<tr>
<td style="vertical-align: top; padding: 0.75pt"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; text-align: justify"><font style="font-size: 8pt">Distributions received from equity method investees.</font></td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellpadding="0" style="width: 100%; font: 12pt Times New Roman, Times, Serif">
<tr>
<td style="vertical-align: top; padding: 0.75pt"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; text-align: justify"><font style="font-size: 8pt">Beneficial interests in securitization transactions.</font></td></tr>
<tr>
<td style="vertical-align: top; padding: 0.75pt"><font style="font-size: 8pt">●</font></td>
<td colspan="2" style="padding: 0.75pt; text-align: justify"><font style="font-size: 8pt">Separately identifiable cash flows and application of the predominance principle.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 45pt">ASU 2016-15 is effective
for annual and interim periods beginning after December 15, 2017, and early adoption is permitted for all entities. Entities must
apply the guidance retrospectively to all periods presented but may apply it prospectively from the earliest date practicable if
retrospective application would be impracticable. The provisions of this standard are not expected to significantly impact the
Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 45pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 45pt">In May 2016, the FASB issued
ASU No. 2016-11, “Rescission of SEC Guidance Because of Accounting Standards Update 2014-09 and 2014-16 Pursuant to Staff
Announcements at the March 3, 2016 EITF Meeting” (“ASU 2016-11”). ASU 2016-11 rescinds certain SEC guidance from
the <i>FASB Codification</i> in response to announcements made by the SEC staff at the Emerging Issues Task Force’s March
3, 2016 meeting. Specifically, ASU 2016-11 supersedes SEC observer comments on the following topics:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 0 -20pt; text-indent: 0.5in">           
  ● Upon the adoption of ASU 2014-09:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 63pt">o Revenue and expense recognition for freight
services in process (ASC 605-20-S99-2)</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 63pt">o Accounting for shipping and handling fees and
costs (ASC 605-45-S99-1)</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 63pt">o Accounting for consideration given by a vendor
to a customer (ASC 605-50-S99-1)</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 63pt">o Accounting for gas-balancing arrangements (ASC
932-10-S99-5).</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt">     
        ● Upon the adoption of ASU 2014-16:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 0 60pt; text-indent: 0pt">o Determining the nature of a host contract
related to a hybrid financial instrument issued in the form of a share under ASC 815 (ASC 815-10-S99-3). </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">ASU 2016-11 is effective upon the adoption of
ASU 2014-09 and ASU 2014-16. The adoption of ASU 2016-11 is not expected to have a material impact on the Company’s condensed
consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">In March 2016, the FASB issued ASU No. 2016-09,
“Simplifying the Accounting for Share-Based Payments” (“ASU 2016-09”). ASU 2016-09 simplifies several aspects
of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting
for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows.
ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those
annual reporting periods. The provisions of this standard are not expected to significantly impact the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Other pronouncements issued by the FASB or other
authoritative accounting standards group with future effective dates are either not applicable or not significant to our consolidated
financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">The preparation of financial statements in conformity
with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the applicable reporting period. Actual results could differ from those estimates. Such differences could be material
to the consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">We treat liquid investments with original maturities
of three months or less when purchased as cash and cash equivalents.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">We record cash pledged or held in trust as restricted
cash. As of September 30, 2016 and December 31, 2015, we have approximately $0.6 million of restricted cash pledged to secure a
line of credit as a security deposit for an <font style="background-color: white">Office Agreement</font> (see Note 8).</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Investment securities at September 30, 2016 and
December 31, 2015 consist of short-term and long-term government securities. We classify these securities as held-to-maturity.
Held-to-maturity securities are those securities in which we have the ability and intent to hold the security until maturity. Held-to-maturity
securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Premiums and discounts
are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective
interest method.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">A decline in the market value of any investment
security below cost, that is deemed to be other than temporary, results in a reduction in the carrying amount to fair value. The
impairment is charged to operations and a new cost basis for the security is established. Other-than-temporary impairment charges
would be included in interest and other (income) expense, net. Dividend and interest income are recognized when earned.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Financial instruments that potentially subject
the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and long-term
investments. The Company maintains its cash and cash equivalents, short-term investments and long-term investments with high-credit
quality financial institutions. At times, such amounts may exceed federally-insured limits.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">We recognize license revenue in accordance with
the revenue recognition guidance of the FASB Codification. We analyze each element of our licensing agreement to determine the
appropriate revenue recognition. The terms of the license agreement may include payments to us of non-refundable up-front license
fees, milestone payments if specified objectives are achieved, and/or royalties on product sales. We recognize revenue from upfront
payments over the period of significant involvement under the related agreements unless the fee is in exchange for products delivered
or services rendered that represent the culmination of a separate earnings process and no further performance obligation exists
under the contract. We recognize milestone payments as revenue upon the achievement of specified milestones only if (1) the milestone
payment is non-refundable, (2) substantive effort is involved in achieving the milestone, (3) the amount of the milestone is reasonable
in relation to the effort expended or the risk associated with achievement of the milestone, and (4) the milestone is at risk for
both parties. If any of these conditions are not met, we defer the milestone payment and recognize it as revenue over the estimated
period of performance under the contract.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 45pt">Generally, research and development
costs are expensed as incurred. Non-refundable advance payments for goods or services that will be used or rendered for future
research and development activities are deferred and amortized over the period that the goods are delivered or the related services
are performed, subject to an assessment of recoverability. We make estimates of costs incurred in relation to external clinical
research organizations, or CROs, and clinical site costs. We analyze the progress of clinical trials, including levels of patient
enrollment, invoices received and contracted costs when evaluating the adequacy of the amount expensed and the related prepaid
asset and accrued liability. Significant judgments and estimates must be made and used in determining the accrued liability balance
and expense in any accounting period. We review and accrue CRO expenses and clinical trial study expenses based on work performed
and rely upon estimates of those costs applicable to the stage of completion of a study. Accrued CRO costs are subject to revisions
as such trials progress to completion. Revisions are charged to expense in the period in which the facts that give rise to the
revision become known. With respect to clinical site costs, the financial terms of these agreements are subject to negotiation
and vary from contract to contract. Payments under these contracts may be uneven, and depend on factors such as the achievement
of certain events, the successful recruitment of patients, the completion of portions of the clinical trial or similar conditions.
The objective of our policy is to match the recording of expenses in our financial statements to the actual services received and
efforts expended. As such, expense accruals related to clinical site costs are recognized based on our estimate of the degree of
completion of the event or events specified in the specific clinical study or trial contract.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt"><br />
                    Prepaid research and development
in our consolidated balance sheets includes, among other things, certain costs related to development and manufacturing services.
These development and manufacturing agreements often require payments in advance of services performed or goods received. Accordingly,
as of September 30, 2016 and December 31, 2015, we recorded approximately $10.1 million and $9.2 million of prepaid development
and manufacturing services, respectively, in prepaid research and development related to such advance agreements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Income taxes are accounted for under the asset
and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases,
operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment
date. If the likelihood of realizing the deferred tax assets or liability is less than “more likely than not,” a valuation
allowance is then created.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">We recognize all share-based payments to employees
and non-employee directors (as compensation for service) as noncash compensation expense in the condensed consolidated financial
statements based on the fair values of such payments. Stock-based compensation expense recognized each period is based on the value
of the portion of share-based payment awards that is ultimately expected to vest during the period. Forfeitures are estimated at
the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">For share-based payments to consultants and other
third-parties (including related parties), noncash compensation expense is determined at the “measurement date.” The
expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation
expense remains uncertain. We record compensation expense based on the fair value of the award at the reporting date. The awards
to consultants and other third-parties (including related parties) are then revalued, or the total compensation is recalculated
based on the then current fair value, at each subsequent reporting date.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">In addition, because some of the options, restricted
stock and warrants issued to employees, consultants and other third-parties vest upon achievement of certain milestones, the total
expense is uncertain. Compensation expense for such awards that vest upon the achievement of milestones is recognized when the
achievement of such milestones becomes probable.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Basic net loss per share of our common stock is
calculated by dividing net loss applicable to the common stock by the weighted-average number of our common stock outstanding for
the period. Diluted net loss per share of common stock is the same as basic net loss per share of common stock since potentially
dilutive securities from stock options, stock warrants and convertible preferred stock would have an antidilutive effect either
because we incurred a net loss during the period presented or because such potentially dilutive securities were out of the money
and the Company realized net income during the period presented. The amounts of potentially dilutive securities excluded from the
calculation were 6,664,591 and 5,634,005 for the three and nine months ended September 30, 2016 and 2015, respectively. The following
outstanding shares of potentially dilutive securities were excluded from the computation of net loss per share attributable to
common stockholders for the periods presented because including them would have been antidilutive:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Three and Nine Months Ended September 30,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>2015</b></font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%; text-indent: 9pt"><font style="font-size: 8pt">Unvested restricted stock</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">5,507,250</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">4,404,805</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Warrants</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,142,208</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,211,177</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Shares issuable upon note conversion</font></td>
<td> </td>
<td style="border-bottom: Black 1.5pt solid"> </td>
<td style="text-align: right; border-bottom: Black 1.5pt solid"><font style="font-size: 8pt">15,133</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: Black 1.5pt solid"> </td>
<td style="text-align: right; border-bottom: Black 1.5pt solid"><font style="font-size: 8pt">18,023</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">6,664,591</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">5,634,005</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Long-lived assets are reviewed for potential impairment
when circumstances indicate that the carrying value of long-lived tangible and intangible assets with finite lives may not be recoverable.
Management’s policy in determining whether an impairment indicator exists, a triggering event, comprises measurable operating
performance criteria as well as qualitative measures. If an analysis is necessitated by the occurrence of a triggering event, we
make certain assumptions in determining the impairment amount. If the carrying amount of an asset exceeds its estimated future
cash flows, an impairment charge is recognized.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 45pt">Goodwill is reviewed for impairment annually,
or earlier when events arise that could indicate that an impairment exists. We test for goodwill impairment using a two-step process.
The first step compares the fair value of the reporting unit with the unit's carrying value, including goodwill. When the carrying
value of the reporting unit is greater than fair value, the unit’s goodwill may be impaired, and the second step must be
completed to measure the amount of the goodwill impairment charge, if any. In the second step, the implied fair value of the reporting
unit’s goodwill is compared with the carrying amount of the unit’s goodwill. If the carrying amount is greater than
the implied fair value, the carrying value of the goodwill must be written down to its implied fair value. We will continue to
perform impairment tests annually, at December 31, and whenever events or changes in circumstances suggest that the carrying value
of an asset may not be recoverable.</p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Three and Nine Months Ended September 30,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>2015</b></font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%; text-indent: 9pt"><font style="font-size: 8pt">Unvested restricted stock</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">5,507,250</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">4,404,805</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Warrants</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,142,208</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,211,177</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Shares issuable upon note conversion</font></td>
<td> </td>
<td style="border-bottom: Black 1.5pt solid"> </td>
<td style="text-align: right; border-bottom: Black 1.5pt solid"><font style="font-size: 8pt">15,133</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: Black 1.5pt solid"> </td>
<td style="text-align: right; border-bottom: Black 1.5pt solid"><font style="font-size: 8pt">18,023</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">6,664,591</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">5,634,005</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>September 30, 2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>December 31, 2015</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 70%; text-indent: 9pt"><font style="font-size: 8pt">Money market funds</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 12%; text-align: right"><font style="font-size: 8pt">24,316,496</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 12%; text-align: right"><font style="font-size: 8pt">8,265,583</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Checking and bank deposits</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">4,840,025</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">46,795,746</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">29,156,521</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">55,061,329</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="14" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>September 30, 2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Amortized cost, as adjusted</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Gross unrealized holding gains</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>Gross unrealized holding losses</b></font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>Estimated fair value</b></font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Short-term investments:</font></td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%; text-indent: 9pt"><font style="font-size: 8pt">Obligations of domestic governmental agencies (maturing between October 2016 and September 2017) (held-to-maturity)</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">31,445,616</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">19,363</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">31,464,979</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Total short-term investment securities</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">31,445,616</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">19,363</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">31,464,979</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="margin-top: 0; margin-bottom: 0"> </p>
<p style="margin-top: 0; margin-bottom: 0"></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="14" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>December 31, 2015</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Amortized cost, as adjusted</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Gross unrealized holding gains</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>Gross unrealized holding losses</b></font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>Estimated fair value</b></font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Short-term investments:</font></td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%; text-indent: 9pt"><font style="font-size: 8pt">Obligations of domestic governmental agencies (maturing between January 2016 and December 2016) (held-to-maturity)</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">22,166,512</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">22,822</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">22,143,690</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </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>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify; text-indent: 9pt"><font style="font-size: 8pt">Long-term investments:</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>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Obligations of domestic governmental agencies (maturing between January 2017 and December 2017) (held-to-maturity)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">25,003,032</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">85,846</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">24,917,186</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Total short-term and long-term investment securities</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">47,169,544</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">108,668</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">47,060,876</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="margin-top: 0; margin-bottom: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="14" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Financial liabilities at fair value as of September 30, 2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Level 1</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Level 2</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Level 3</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Total</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%; text-indent: 9pt"><font style="font-size: 8pt">5% Notes</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 0%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 0%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 0%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 0%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 9pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="14" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Financial liabilities at fair value as of December 31, 2015</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Level 1</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Level 2</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Level 3</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Total</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%; text-indent: 9pt"><font style="font-size: 8pt">5% Notes</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 0%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 0%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 0%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 0%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">--</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="width: 88%; text-indent: 9pt"><font style="font-size: 8pt">Fair value at December 31, 2015</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Interest accrued on face value of 5% Notes</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">674,699</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Conversion of 5% notes</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(30,601</font></td>
<td><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Change in fair value of Level 3 liabilities</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">(738,521</font></td>
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Fair value at September 30, 2016</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Number of Shares</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Weighted Average Grant Date Fair Value</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 72%; text-indent: 9pt"><font style="font-size: 8pt">Outstanding at December 31, 2015</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"><font style="font-size: 8pt">7,359,915</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 11%; text-align: right"><font style="font-size: 8pt">7.83</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">261,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">7.13</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Vested</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(578,892</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">7.13</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Forfeited</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">(34,773</font></td>
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 3pt"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">11.83</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Outstanding at September 30, 2016</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">7,007,250</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">7.82</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Warrants</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Weighted average
exercise price</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Aggregate Intrinsic Value</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 62%; text-indent: 9pt"><font style="font-size: 8pt">Outstanding at December 31, 2015</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 9%; padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">1,186,749</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"><font style="font-size: 8pt">$</font></td>
<td style="width: 10%; padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">2.37</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; padding-bottom: 3pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="width: 10%; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">11,341,452</font></td>
<td style="width: 1%; padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Issued</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">--</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">--</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Exercised</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(44,541</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2.26</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Expired</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">--</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: 8pt">--</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"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Outstanding at September 30, 2016</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">1,142,208</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">2.38</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">6,125,109</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>Three months ended September 30,</b></font></td>
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>Nine months ended September 30,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>2015</b></font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt double; text-align: center"><font style="font-size: 8pt"><b>2015</b></font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 40%; text-indent: 9pt"><font style="font-size: 8pt">Stock-based compensation expense associated with restricted stock</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 11%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">2,834,038</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 11%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">1,240,034</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 11%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">6,181,400</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 11%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">12,840,048</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">2,834,038</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">1,240,034</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">6,181,400</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">12,840,048</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="10" style="padding-bottom: 1.5pt; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt"> <b>September 30, 2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td colspan="10" style="text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt"><b>December 31</b>, <b>2015</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Current portion, net</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Non-current portion, net</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Total</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Current portion, net</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Non-current portion, net</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Total</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 28%; text-indent: 9pt"><font style="font-size: 8pt">Convertible 5% Notes Payable</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 0%; border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 9pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">117,126</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">211,549</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
</table>
600000
600000
117126
211549
674699
-30601
-738521
7359915
7007250
261000
578892
34773
7.83
7.82
7.13
7.13
11.83
1186749
1142208
0
44541
0
2.37
2.38
0
2.26
0
11341452
6125109
6181400
12840048
2834038
1240034
6181400
12840048
2834038
1240034
396811
3600000
3500000
178000000
0
1125
5000000
177000000
114286
114286
100000
100000
38096
38096
38000
38000
P15Y
100000
500000
0
33042
0
0
33042
6664591
5634005
5507250
1142208
15133
4404805
1211177
18023
60700000
.50
1000000
800000
2700000
0.001
15800000
P1Y7M20D
9.00
3938403
1000000
2500000