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<p style="font: italic bold 8pt Times New Roman, Times, Serif; margin: 0 0 12pt">Organization and Business:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in">CorMedix Inc., incorporated
in July 2006 under the laws of the State of Delaware (the “Company”), is a development stage pharmaceutical and medical
device company that seeks to in-license, develop and commercialize therapeutic products for the treatment of cardio- renal and
infectious disease, specifically in the dialysis and non-dialysis areas.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<p style="font: italic bold 8pt Times New Roman, Times, Serif; margin: 0 0 12pt">Basis of Presentation:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in">The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article
10 of Regulation S-X. Accordingly, the unaudited condensed consolidated financial statements do not include all information and
footnotes required by GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for
a fair presentation of such interim results. Interim operating results are not necessarily indicative of results that may be expected
for the full year ending December 31, 2013 or for any subsequent period. These unaudited condensed consolidated financial statements
should be read in conjunction with the audited financial statements and notes thereto of the Company which are included in the
Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 27, 2013.
The accompanying condensed balance sheet as of December 31, 2012 has been derived from the audited financial statements included
in such Form 10-K.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: left; text-indent: 0.5in">The Company’s
primary activities since incorporation have been organizational activities, including recruiting personnel, acquiring licenses
for its pharmaceutical compound pipeline, performing business and financial planning, performing research and development, establishing
office facilities, and raising funds through the issuance of debt and common stock. The Company has not generated any revenues
from its product candidates and, accordingly, the Company is considered to be in the development stage.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Company’s unaudited condensed consolidated
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments through the normal course of business. The unaudited condensed consolidated financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the
amounts and classification of liabilities. The Company has sustained losses since its inception and expects that such losses will
continue at least through 2014 depending on revenue levels and potential strategic partnerships. As of September 30, 2013, management
believes that the majority of the Company’s resources, including the Company’s research and development efforts, and
commercialization of Neutrolin<sup>®</sup> (CRMD003) in Europe, combined with the Company’s receipt of convertible preferred
equity financing funds in October 2013 (see Note 7), will result in the currently available capital resources of the Company being
sufficient to meet the Company’s operating needs through the second quarter of 2014, assuming no sales and/or strategic partnerships
will occur. The Company intends to raise additional funds through various potential sources, such as equity and/or debt financings,
strategic relationships, or out-licensing of its products, however, the Company can provide no assurances that such financing will
be available on acceptable terms, or at all. <font style="color: black">If adequate financing is not available, the Company may
be required to terminate or significantly curtail or cease its operations, or enter into arrangements with collaborative partners
or others that may require the Company to relinquish rights to certain of its technologies, or potential markets that the Company
would not otherwise relinquish.</font></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-align: left; text-indent: 0.5in">These matters, among others,
raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated
financial statements do not include any adjustments that might result from the outcome of this uncertainty.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in">For the nine months ended September 30, 2013 and the period from July 28, 2006 (inception) to September 30, 2013, the Company
incurred net losses of $5,727,821 and $52,101,055, respectively.</p>
<p style="margin: 0pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b><i>Use
of Estimates:</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenue and expenses during the reporting period.  Actual results could differ from
those estimates.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b><i>Basis
of Consolidation:</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">The
consolidated financial statements include the accounts of CorMedix Europe GmbH, a wholly owned subsidiary.  All significant
intercompany accounts and transactions have been eliminated in consolidation.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b><i>Foreign
Currency:</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">The
consolidated financial statements are presented in U.S. Dollars (USD), the reporting currency of the Company.  For the
financial statements of the Company’s foreign subsidiary, whose functional currency is the USD, foreign currency asset and
liability amounts, if any, are remeasured into USD at end-of-period exchange rates, except for inventories, prepaid expenses,
property, plant and equipment, goodwill and other intangible assets, which are remeasured at historical rates.  Foreign
currency income and expenses are remeasured at average exchange rates in effect during the year, except for expenses related to
balance sheet amounts remeasured at historical exchange rates.  Exchange gains and losses arising from remeasurement
of foreign currency-denominated monetary assets and liabilities are included in income in the period in which they occur.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b><i>Restricted
Cash:</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">As
of September 30, 2013, the Company invested in a twelve-month 0.14% certificate of deposit held by the bank as collateral for
a letter of credit in connection with the Company’s purchase of raw materials due to be delivered in the next twelve months.  The
certificate of deposit will terminate without penalties once the transaction covered by the letter of credit is completed.  The
certificate of deposit is recorded on the balance sheet as restricted cash.  The restricted cash account is
classified as current if at the end of the reporting period, the restriction is expected to be lifted in the next twelve months
or the contractual maturity date of the certificate of deposit is in the next twelve months.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b><i>Loss
per common share:</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">Basic
earnings (loss) per common share excludes any potential dilution and is computed by dividing net income (loss) by the weighted
average number of common shares outstanding during the period.  Diluted earnings per common share reflect the potential
dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock that then shared in the earnings of the entity.  However, since their effect
is anti-dilutive, the Company has excluded potentially dilutive shares.  The following potentially dilutive shares have
been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext"><b>September
30, </b></font><font style="font: 8pt Times New Roman, Times, Serif"><br />
<font style="color: windowtext"><b>2013</b></font></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext"><b>September
30, </b></font><font style="font: 8pt Times New Roman, Times, Serif"><br />
<font style="color: windowtext"><b>2012</b></font></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Convertible notes</font></td>
<td style="width: 1%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">2,035,628</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">2,428,571</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Series B non-voting preferred stock</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">454,546</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">-</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Shares underlying outstanding warrants</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">8,985,025</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">6,932,534</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Shares underlying
outstanding stock options</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">3,179,630</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">1,135,630</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Total</font></td>
<td style="padding-bottom: 0.25pc; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">14,654,829</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 0.25pc; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">10,496,735</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b><i>Inventories:</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">Inventories
are valued at the lower cost or market on a first in, first out basis.  Inventories consist of raw materials (including
labeling and packaging), work-in-process, and finished goods, if any, for the Neutrolin product.  Inventories consist
of the following at September 30, 2013:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Raw materials</font></td>
<td style="width: 1%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">216,916</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1pt"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Work-in-process</font></td>
<td style="text-align: right; padding-bottom: 1pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; border-bottom: Black 1pt solid"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">53,590</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Total</font></td>
<td style="padding-bottom: 0.25pc; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">270,506</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b><i>Accrued
Expenses:</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">Accrued
expenses consist of the following:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext"><b>September
30, </b></font><font style="font: 8pt Times New Roman, Times, Serif"><br />
<font style="color: windowtext"><b>2013</b></font></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext"><b>December
31, </b></font><font style="font: 8pt Times New Roman, Times, Serif"><br />
<font style="color: windowtext"><b>2012</b></font></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Licensing fee</font></td>
<td style="width: 1%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">500,000</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">-</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Royalty fee</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">153,750</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">90,000</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Accrued payroll and payroll taxes</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">134,562</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">-</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Professional fees</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">12,000</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">108,532</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Accrued interest</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">4,455</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">10,763</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1pt"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Other</font></td>
<td style="text-align: right; padding-bottom: 1pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; border-bottom: Black 1pt solid"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">25,316</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; padding-bottom: 1pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; border-bottom: Black 1pt solid"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">97,688</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Total</font></td>
<td style="padding-bottom: 0.25pc; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">830,083</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 0.25pc; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">306,983</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b><i>Stock-Based
Compensation:</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">Awards
granted to employees, officers and directors are measured at the grant date, based on the estimated fair value of the award, and
stock-based compensation cost, net of expected forfeitures, is recognized as expense over the requisite service period on a straight-line
basis.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">The
Company accounts for stock options granted to non-employees on a fair value basis using the Black-Scholes option pricing method.  The
non-cash charge to operations for non-employee options with service vesting is revalued at the end of each reporting period based
upon the change in the fair value of the options and amortized to consulting expense over the related vesting period.  For
stock options granted to non-employees with vesting contingent upon various performance metrics, the Company used the guidelines
in accordance with FASB ASC No. 505-50, “Equity-Based Payments to Non-Employees.” For options having performance conditions
that are outside of the control of the non-employee, the cost to be recognized is the lowest aggregate fair value prior to the
achievement of the performance condition, even if the Company believes it is probable that the performance condition will be achieved.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">During
the nine months ended September 30, 2013 and 2012, options to purchase an aggregate of 1,400,000 and 380,000 shares of common
stock, respectively, were granted to the Company’s employees, officers, directors and consultants.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> <b> <i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b><i>Fair
Value Option:</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">As
permitted under FASB ASC 825, <i>Financial Instruments </i>(“ASC 825”), the Company has elected the fair value option
to account for its convertible notes that were issued during the quarter ended September 30, 2013.   ASC 825 requires
that the entity record the financial asset or financial liability at fair value rather than at historical cost with changes in
fair value recorded in the statement of operations.  In addition, it requires that upfront costs and fees related
to items for which the fair value option is elected be recognized in earnings as incurred and not deferred.</font></p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">On
July 5, 2013, the Company received net proceeds of $1,372,500 upon approval of a CE Mark certification.  The Company
had entered into an agreement with existing stockholders in May 2013 for an aggregate principal amount of $1,500,000 of senior
secured convertible notes and warrants to purchase up to an aggregate of 1,000,000 shares of its common stock.  The
receipt of net proceeds of $1,372,500 was dependent upon receipt of a CE Mark certification, which occurred on July 5, 2013.  The
notes bear interest at the rate of 8.0% per annum and will be subject to a “make-whole” upon any conversion of the notes
into common stock, as if the notes being converted were outstanding to April 1, 2014.  Interest was first payable on
September 3, 2013 and is payable on the first trading day of each month thereafter.  The notes mature on April 1, 2016
unless redeemed prior to that date, subject to amortization, discussed below.  A noteholder may elect to have any interest
due prior to April 1, 2014 added to the principal amount of a note; thereafter, interest will be paid in cash only.  The
warrants are exercisable one year after issuance, have an exercise price of $1.10 per share, subject to anti-dilution adjustment,
and a term of five years from the date they are first exercisable.  The holders of the notes and warrants will be prohibited
from converting the notes into or exercising the warrants for shares of common stock if, as a result of such conversion or exercise,
the holder, together with its affiliates, would own more than 4.99% or 9.99%, at the initial holder’s election, of the total
number of shares of the Company’s common stock then issued and outstanding.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">The
Company will redeem the notes in cash at par value or in shares of stock which are priced in accordance with a pricing formula
set forth in the notes, in eight equal monthly installment payments beginning on September 1, 2013, and continuing thereafter
on the first business day of each month, ending on April 1, 2014.  At the Company’s option, and if certain equity
conditions are waived or satisfied, the Company may elect to pay these installment payments in shares of common stock, in cash,
or in any combination of shares and cash. To the extent the Company pays all or any portion of an installment payment in common
stock, the Company will deliver to each noteholder the amount of shares equal to the applicable installment payment being paid
in shares of common stock, divided by the lower of (i) the conversion price then in effect, and (ii) 90% of the average of the
10 lowest-volume weighted-average prices of our common stock during the 20 trading day period ending two trading days prior to
the applicable payment date(the “Company Conversion Price”). </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">All
installment payments are subject to the right of each noteholder to defer payment of some or all of any installment payment to
a subsequent installment date or the maturity date, and, with respect to any installment date, convert, at the then-prevailing
Company Conversion Price, any amount of principal and capitalized interest up to an amount equal to four installment payments.  Each
noteholder may also convert, at any time, all or a portion of any deferred installment payment.  The Company Conversion
Price for any such deferred installment payment shall be the lower of the Company Conversion Price in effect on the date of the
original installment date and the Company Conversion Price then in effect.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">Due
to the complexity and number of embedded features within the convertible note and as permitted under under ASC 825, the Company
elected to account for the convertible notes and all the embedded features (collectively, the “hybrid instrument”) under
the fair value option. ASC 825 requires the entity to record the financial asset or financial liability at fair value rather
than at historical cost with changes in fair value recorded in the statement of operations.  In addition, it requires
that upfront costs and fees related to items for which the fair value option is elected be recognized in earnings as incurred
and not deferred.  On the initial measurement date of July 5, 2013, the fair value of the hybrid instrument was estimated
at $1,643,500, which was $143,500 higher than the principal amount of $1,500,000.  During the quarter ended September
30, 2013, there were redemptions and voluntary conversions of the convertible note, resulting in a $451,250 reduction in the outstanding
principal balance to $1,048,750 at September 30, 2013.  The corresponding fair value of the outstanding balance of the
hybrid instrument at September 30, 2013 was $1,113,900.  During the quarter ended September 30, 2013, the Company recorded
a gain of $41,134 related to changes in the fair value of the hybrid instrument, of which $35,180 was unrealized and $5,954 was
realized in connection with the redemptions and voluntary conversions that occurred during the quarter. The Company also recorded
a $33,626 loss on extinguishment of convertible notes related to the conversions and redemptions during the quarter ended September
30, 2013.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">The
Company used a Monte Carlo model to separately value the warrants issued in connection with the convertible notes in order to
take into account the possibility of an adjustment to the exercise price associated with new rounds of financing in the future.
The most likely exercise price of the warrants was estimated under various stock price scenarios and the noteholders’ payoffs
were computed under each scenario. The present value of the mean of such payoffs represents the value of the warrant on any given
valuation date. When the stock price was simulated in the model, the possible scenarios were always between the valuation date
stock price and the initial exercise price of $1.10. As a result, the Company estimated the fair value of the warrant liability
on the issuance date to be $587,600.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">A
summary of the key assumptions used by the Company in the Monte Carlo simulation model to value the hybrid instrument at each
of the relevant measurement dates during the quarter is as follows:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><i>Stock price
– </i>Due to the historical volatility of the stock price, a 30 day volume weighted average stock price was used as of each
valuation date.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; 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"><font style="font: 8pt Times New Roman, Times, Serif"><i>Conversion/redemption
strike price</i> – These assumptions incorporate both the initial contractual conversion price as well as subsequent downward
adjustments  based on management’s estimate of the probabilities of additional future financings that would  include
a stock price or conversion price that is lower than the then existing conversion price.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; 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"><font style="font: 8pt Times New Roman, Times, Serif"><i>Volatility
</i>– Given that the Company recently received CE Mark approval for Neutrolin, the volatility used in the analysis was a
weighted average of 1) the Company’s historical volatility, 2) the Company’s volatility after the receipt of CE approval
and 3) the volatilities of comparable companies following the receipt of product approval.  The resulting volatility
used in the analysis was 75%.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; 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"><font style="font: 8pt Times New Roman, Times, Serif"><i>Term</i>
– Based on an evaluation of the terms of the agreement, management has assumed that it would be advantageous for the holders
of the Convertible Notes to redeem all installments by April 2014 rather than defer them to a later date.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><i> </i></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><i>Probability
of Event of Default or Change in Control</i> – Management has concluded that the probability of a change in control or event
of default during the term of the hybrid instrument is only 5%.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; 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"><font style="font: 8pt Times New Roman, Times, Serif"><i>Risk-free
Rate</i> – The US Treasury Bond Rate with a term approximating the term of the instrument was used as the risk-free interest
rate in the valuation.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; 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"><font style="font: 8pt Times New Roman, Times, Serif"><i>Credit
adjusted discount rate </i>– Management believes that its debt, if rated, would be equivalent to Moody’s C rated bonds
or lower.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; 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"><font style="font: 8pt Times New Roman, Times, Serif"><i>Dividend
rate </i>- Management does not expect to pay any dividends during the term of the hybrid instrument.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; 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: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">The
following table is a rollforward for the quarter ended September 30, 2013 of the balance of the carrying amount of the convertible
notes for which the fair value option was elected:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%; background-color: white">
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 89%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Balance
at July 1, 2013</font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">-</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="text-indent: 0pt; padding-left: -80pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Issuance
of convertible notes</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">1,643,500</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Conversion
of convertible notes during quarter</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">(488,466</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">)</font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="text-indent: 0pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Realized gain
resulting from change in fair value on converted debt</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">(5,954</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0pt"><font style="font: 8pt Times New Roman, Times, Serif">Unrealized gain
resulting from change in fair value on debt outstanding
at</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif">     September
30, 2013</font></p></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">(35,180</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">)</font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Balance
at September 30, 2013 </font></td>
<td style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext"> 1,113,900</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; 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: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif; letter-spacing: 9pt">   </font><font style="font: 8pt Times New Roman, Times, Serif"> The
following table is a rollforward for the quarter ended September 30, 2013 of the carrying amount of the warrant liability that
was issued during the quarter in connection with the convertible notes.  The warrants are accounted for as a derivative
liability and are valued using a Monte Carlo simulation model in order to take into account the possibility of adjustments to
the exercise price resulting from additional rounds of financing.  During the quarter, there were no exercises of these
warrants.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 89%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Balance
at July 1, 2013</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td nowrap="nowrap" style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">-</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="text-indent: -10pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext; letter-spacing: 9pt"> </font><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Issuance
of warrants</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">587,600</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; text-indent: -20pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext; letter-spacing: 9pt">  </font><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Unrealized
gain resulting from change in fair value</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">(4,800</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">)
</font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Balance
at September 30, 2013</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td nowrap="nowrap" style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">582,800</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; 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: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">During
the year ended December 31, 2012, the Company completed a private placement of an aggregate of 1,324 Units, each Unit consisting
of (i) a one-year $1,000 aggregate principal amount 9% Senior Convertible Note (the "Notes"), convertible into shares
(the "Conversion Shares") of common stock, at a conversion price of $0.35 per share, and (ii) a five-year redeemable Warrant
(the "Warrants") to purchase 2,500 shares of common stock (the "Warrant Shares"), to certain accredited investors
(the "Purchasers") pursuant to Subscription Agreements dated September 20, 2012 and November 13, 2012 (the “Subscription
Agreements”).  The Company received aggregate gross proceeds of $1,324,000. The total net proceeds (net of placement
agent and legal fees) of the private placement to the Company were $1,095,600.  The Company paid the placement agent
for the private placement a total of $109,900 in fees and issued it warrants to purchase an aggregate of 331,000 shares of its
common stock.  The placement agent warrants have the same terms as those issued to the investors.  The Notes
issued have maturity dates of September 20, 2013 and November 13, 2013.  During the nine months ended September 30,
2013, $899,000 of these notes were converted resulting in the issuance of 2,568,572 shares of the Company’s common stock.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">The
Notes bear interest at 9% per annum payable quarterly in arrears. The Company has the right to prepay, in certain instances, all
(but not less than all, subject to certain share ownership limitations) of the then outstanding Notes by paying 120% of the principal
and accrued but unpaid interest through and including the date each Note is repaid.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">The
Purchasers were issued Warrants to purchase the Company's common stock, exercisable for a period of five years at an initial exercise
price of $0.40, subject to anti-dilution adjustment. The Warrants provide for customary adjustments to the exercise price in the
event of stock splits, stock dividends and other similar corporate events and may be exercised on a cashless basis. The Warrants
do not confer any voting rights or any other rights as a shareholder.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">The
Company, upon thirty-day notice to holders of outstanding Warrants, has the right, subject to certain limitations, to redeem all
or any portion of the Warrants then outstanding for consideration of $0.001 per Warrant if (i) either (a) there is an effective
registration statement for resale of all of the Conversion Shares, or (b) all of the Conversion Shares may be resold pursuant
to Rule 144 without any restrictions or limitations, and (ii) for the ten consecutive trading days prior to the date that the
Company notifies such holders of such redemption, (a) the daily volume-weight adjusted market price of the Common Stock is equal
to or greater than 140% of the then exercise price, and (b) the average daily value of the trading volume is not less than $100,000.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">The
Company accounted for the beneficial conversion feature (“BCF”) and warrant in accordance with FASB ASC 470-20, Debt
with Conversion and Other Options.  The Company recorded a BCF related to the issuance of convertible debt that had
conversion features at fixed rates that were “in-the-money” when issued and the fair value of warrants issued in connection
with those instruments.  The BCF for the convertible instruments is recognized and measured by allocating a portion
of the proceeds to warrants, based on their relative fair value, and as a reduction to the carrying amount of the convertible
debt equal to the intrinsic value of the conversion feature.  The discount recorded in connection with the BCF and warrant
valuation is amortized over the terms of the convertible notes and is recognized as non-cash interest expense.  The
Company recorded an aggregate of $1,333,307 for the calculated fair value of the warrants and BCF, in conjunction with the convertible
notes issued on September 20, 2012 and November 13, 2012.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; 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: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">The
Company valued the warrants using the fair value method, at the date the warrants were issued, using the Black-Scholes valuation
model and the following assumptions:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext"><b>September
20, </b></font><font style="font: 8pt Times New Roman, Times, Serif"><br />
<font style="color: windowtext"><b>2012</b></font></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext"><b>November
13,</b></font><font style="font: 8pt Times New Roman, Times, Serif"><br />
<font style="color: windowtext"><b>2012</b></font></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Contractual
Term</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="text-align: center; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">5
years</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="text-align: center; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">5
years</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="width: 78%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Volatility</font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">117.57</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">%</font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">119.15</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Dividend
yield</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">0.0</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">%</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">0.0</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Risk-free
interest rate</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">0.70</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">%</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">0.63</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">%</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Senior convertible
notes and its related accrued interest consist of the following at September 30, 2013:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 89%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">9%
senior convertible notes, related parties</font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">425,000</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Debt
discount/beneficial conversion feature</font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">(4,015</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Balance</font></td>
<td style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">420,985</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Accrued
interest, 9% senior convertible notes related parties</font></td>
<td style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">14,262</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Accrued
interest 9% senior convertible notes </font></td>
<td style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">4,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">8%
senior convertible notes at fair value</font></td>
<td style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext; letter-spacing: 9pt">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">311,900</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">8%
senior convertible notes at fair value, related party</font></td>
<td style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">802,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Accrued
intest - 8% Senior convertible notes, related party</font></td>
<td style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">5,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<p style="margin: 0pt"> </p>
<p style="font: italic bold 8pt Times New Roman, Times, Serif; margin: 0">Common Stock</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: 0.5in">During the nine months ended September 30, 2013,
a portion of 9% senior convertible notes in the aggregate principal amount of $899,000 were converted at a conversion price of
$0.35 per share resulting in the issuance of an aggregate 2,568,572 shares of the Company’s common stock.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">During the nine months ended September 30, 2013,
the Series A non-voting convertible preferred stock was converted into 761,429 shares of the Company’s common stock.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">During the nine months ended September 30, 2013,
warrants to purchase 150,000 shares of the Company’s common stock were exercised resulting in gross proceeds of $60,000 to
the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">During the nine months ended September 30, 2013,
warrants to purchase 827,913 shares of the Company’s common stock were exercised on a cashless basis resulting in the issuance
of 494,808 shares of common stock.</p>
<p style="font: italic bold 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">During the quarter
ended September 30, 2013, a portion of 8% senior convertible notes in the aggregate principal amount of $451,250 were converted
into common shares and interest in the aggregate amount of $28,855 was paid in common shares resulting in the issuance of an aggregate
576,005 shares of the Company’s common stock.</p>
<p style="font: italic bold 8pt Times New Roman, Times, Serif; margin: 0">Preferred Stock</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: 0.5in">On July 30, 2013, the Company sold 454,546 shares
of its Series B Non-Voting Convertible preferred stock and a warrant to purchase up to 227,273 shares of the Company’s common
stock, for gross proceeds of $500,000. The Series B shares and the warrant were sold together at a price of $1.10 per share for
each share of Series B stock. Each share of Series B Stock is convertible into one share of the Company’s common stock at
any time at the holder’s option. However, the holder will be prohibited from converting Series B Stock into shares of common
stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 3.99% of the total number
of shares of the Company’s common stock then issued and outstanding. In the event of the Company’s liquidation, dissolution,
or winding up, holders of the Series B Stock will receive a payment equal to $0.001 per share of Series B Stock before any proceeds
are distributed to the holders of common stock. Shares of the Series B Stock will not be entitled to receive any dividends, unless
and until specifically declared by the Company’s board of directors, and will rank:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 24px; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="width: 24px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt"></font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">senior to all common stock;</font></td></tr>
</table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 24px"> </td>
<td style="width: 24px"></td>
<td><font style="font-size: 8pt">senior to any class or series of capital stock hereafter created specifically by its terms junior to the Series B Stock;</font></td></tr>
</table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 24px"> </td>
<td style="width: 24px"></td>
<td><font style="font-size: 8pt">on parity with our Series B Preferred Stock and any class or series of capital stock hereafter created specifically ranking by its terms on parity with the Series B Stock; and</font></td></tr>
</table>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 24px"> </td>
<td style="width: 24px"><font style="font-size: 8pt"></font></td>
<td><font style="font-size: 8pt">junior to any class or series of capital stock hereafter created specifically ranking by its terms senior to the Series B Stock;</font></td></tr>
</table>
<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">in each case, as to distributions of assets upon our liquidation,
dissolution or winding up whether voluntarily or involuntarily.</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: 0.5in">The warrant is exercisable immediately upon issuance
and has an exercise price of $1.50 per share and a term of five years. However, the holder will be prohibited from exercising the
warrant if, as a result of such exercise, the holder, together with its affiliates, would own more than 3.99% of the total number
of shares of the Company’s common stock then issued and outstanding.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Because the Series B non-voting preferred
stock is immediately convertible at the option of the holder, we recorded a deemed dividend of $53,246 from the beneficial
conversion feature associated with the issuance of the Series B non-voting convertible preferred stock and the warrant during
the quarter ended September 30, 2013.</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: 0.5in">On February 19, 2013, the Company sold 761,429
shares of its Series A Non-Voting Convertible preferred stock and a warrant to purchase up to 400,000 shares of the Company’s
common stock for gross proceeds of $533,000. The Series A shares and the warrant were sold together at a price of $0.70 per share
for each share of Series A stock. Each share of Series A Stock was convertible into one share of the Company’s common stock
at any time at the holder’s option. However, the holder would be prohibited from converting Series A Stock into shares of
common stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 3.99% of the total
number of shares of the Company’s common stock then issued and outstanding.</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: 0.5in">The warrant is exercisable immediately upon issuance
and has an exercise price of $1.50 per share and a term of five years. However, the holder will be prohibited from exercising the
warrant if, as a result of such exercise, the holder, together with its affiliates, would own more than 3.99% of the total number
of shares of the Company’s common stock then issued and outstanding.</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: 0.5in">During the nine months ended September 30, 2013,
all of the Series A non-voting convertible preferred stock was converted into 761,429 shares of common stock.</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: 0.5in">During the nine months ended September 30, 2013,
because the Series A non-voting preferred stock was immediately convertible at the option of the holder, we recorded a deemed dividend
of $309,944 from the beneficial conversion feature associated with the issuance of the Series A non-voting convertible preferred
stock and the warrant.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: italic bold 8pt Times New Roman, Times, Serif; margin: 0">Stock Options</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On March 20, 2013, the Company’s board
of directors approved the 2013 Stock Incentive Plan (the “2013 Plan”). The 2013 Plan provides for the issuance of equity
grants in the form of options, restricted stock, stock awards and other forms of equity compensation. Awards may be made to directors,
officers, employees and consultants under the 2013 Plan. An aggregate of 5,000,000 shares of the Company’s common stock is
reserved for issuance under the 2013 Plan. The 2013 Plan was approved by the stockholders on July 30, 2013.</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: 0.5in">During the nine months ended September 30, 2013,
the Company granted to its officers and directors ten-year non-qualified stock options under the 2013 Plan, covering an aggregate
of 1,020,000 shares of the Company’s common stock with an exercise price of $0.90 per share. The 310,000 options granted
to four directors vest quarterly over two years. The remaining 710,000 options vest upon specified milestones. The Company recorded
the pro rata expense for these options during the nine months ended September 30, 2013.</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 0 6pt; text-align: left; text-indent: 0.5in">During the nine months
ended September 30, 2013, the Company granted to various non-officer consultants ten-year non-statutory stock options under the
2013 Plan, covering an aggregate of 380,000 shares of the Company’s common stock with an exercise price of $0.90 per share.
Of these options, 260,000 vest upon specified performance milestones, and 120,000 options vest in three years. During the nine
months ended September 30, 2013, 172,000 of these performance options were achieved and therefore the Company recorded the value
of the options on the date the performance was achieved. Additionally, the Company recorded the pro rata expense for the 120,000
options during the nine months ended September 30, 2013. No expense was recognized for the options subject to performance milestones
that were not achieved as of September 30, 2013.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: left; text-indent: 0.5in">In March 2013, the Company’s
board of directors amended the vesting schedule of the options granted on December 5, 2012. Given the anticipated final approval
for the CE Mark certification for <font style="color: #1A1A1A">Neutrolin<sup>®</sup></font> during the second quarter of 2013,
50% of such options were amended to vest on the date of issuance of the CE Mark certification for <font style="color: #1A1A1A">Neutrolin<sup>®</sup></font>
in Europe, if the CE Mark approval was obtained on or before June 30, 2013 (as opposed to March 31, 2013 as previously provided
by our Board). In June 2013, these options were further modified such that vesting would occur if the CE Mark was issued on or
before July 14, 2013 (as opposed to June 30, 2013). During the quarter ended June 30, 2013, the Company reversed the expense recorded
related to the previous value of the options and recorded the pro rata expense related to the modified value of these options.
The expense was amortized through July 5, 2013, the date the CE Mark certification was received.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: left; text-indent: 0.5in">In August 2013, the
Company’s board of directors accelerated the vesting of an aggregate of 70,000 unvested options granted to the Company’s
former Chief Financial Officer at the time of his departure from the Company. Additionally, the exercise period of his total outstanding
options was extended to two years from three months. These modifications resulted in an aggregate expense of $51,079 to the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in">During the nine months ended
September 30, 2013, an aggregate of 237,333 unvested stock options granted to its former Chief Medical Officer under the Amended
and Restated 2006 Stock Incentive Plan (the “2006 Plan”) were forfeited as a result of his departure from the Company.
The Company reversed the recorded expense related to the forfeited stock options during the nine months ended September 30, 2013.</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 0 12pt; text-align: left; text-indent: 0.5in">During the nine months
ended September 30, 2013 and 2012 and the period from July 28, 2006 (inception) to September 30, 2013, total compensation expense
for stock options issued to employees, directors, officers and consultants was $753,476, $183,177 and $3,352,714, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: left; text-indent: 0.5in">The Company records
compensation expense associated with stock options and other forms of equity compensation using the Black-Scholes option-pricing
model and the following assumptions:</p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 5.75pt"> </td><td style="font-weight: bold"> </td>
<td style="font-weight: bold; text-align: left"> </td><td style="font-weight: bold; text-align: right"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Nine Months Ended</b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>September 30, 2013</u></b></p></td><td style="font-weight: bold; text-align: left"> </td><td style="font-weight: bold"> </td>
<td style="font-weight: bold; text-align: left"> </td><td style="font-weight: bold; text-align: right"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Nine Months Ended</b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>September 30, 2012</u></b></p></td><td style="font-weight: bold; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.75pt">Expected Term</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 8pt">2 - 10 years</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 8pt">5 years</font></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 5.75pt">Volatility</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 8pt">86% - 131%</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 8pt">98% - 115%</font></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 56%; text-align: left; padding-left: 5.75pt">Dividend yield</td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 12%; text-align: right">0.0</td><td style="width: 1%; text-align: left">%</td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 12%; text-align: right">0.0</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.75pt">Risk-free interest rate</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 8pt">0.34% - 2.78%</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 8pt">0.27% - 2.11%</font></td><td style="text-align: left"> </td></tr>
</table>
<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: 0.5in">The Company estimated the expected term of the
stock options granted based on anticipated exercises in future periods. The expected term of the stock options granted to consultants
is based upon the contractual terms established within agreements with the Company. Given the Company’s short period of publicly-traded
stock history, management’s estimate of expected volatility is based on the average volatilities of a sampling of five companies
with similar attributes to the Company, including: industry, stage of life cycle, size and financial leverage. The Company will
continue to analyze the expected stock price volatility and expected term assumptions as more historical data for the Company’s
common stock becomes available. The expected dividend yield of 0.0% reflects the Company’s current and expected future policy
for dividends on the Company’s common stock. To determine the risk-free interest rate, the Company utilized the U.S. Treasury
yield curve in effect at the time of grant with a term consistent with the expected term of the Company’s awards. The Company
has experienced forfeitures of stock options issued to its former officers, board member and employees. Consistent with its historical
forfeiture experience, the Company has applied a forfeiture rate of 39% and 55% to calculate stock option expense for the nine
month periods ended September 30, 2013 and 2012, respectively. The Company will continue to evaluate the estimated forfeiture rate
derived from previous forfeitures of officers, directors and employees and may adjust the forfeiture rate based upon actual forfeitures
that may occur in the future.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: left; text-indent: 0.5in">A summary of the Company’s
stock option activity and related information is as follows:</p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="7" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Nine Months Ended<br /> September 30, 2013</td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="7" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Nine Months Ended<br /> September 30, 2012</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="3" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares</td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="3" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted<br /> Average<br /> Exercise<br /> Price</td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="3" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares</td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="3" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted<br /> Average<br /> Exercise<br /> Price</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 40%; text-indent: -13.5pt; padding-left: 13.5pt">Outstanding at beginning of period</td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 10%; text-align: right">2,135,630</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">1.26</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 10%; text-align: right">1,236,342</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">2.47</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-indent: -13.5pt; padding-left: 13.5pt">Forfeited</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(237,333</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">1.61</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(263,050</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">1.71</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-indent: -13.5pt; padding-left: 13.5pt">Expired/Canceled</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(118,667</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">1.61</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(217,662</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">3.13</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt; text-indent: -13.5pt; padding-left: 13.5pt">Granted</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1,400,000</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: left">$</td><td style="text-align: right">0.90</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">380,000</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: left">$</td><td style="text-align: right">0.38</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt; text-indent: -13.5pt; padding-left: 13.5pt">Outstanding at end of period</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">3,179,630</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: left">$</td><td style="text-align: right">1.06</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,135,630</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: left">$</td><td style="text-align: right">1.82</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: -13.5pt; padding-left: 13.5pt">Expected to vest</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">965,325</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: left">$</td><td style="text-align: right">0.81</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">875,958</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: left">$</td><td style="text-align: right">1.82</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: -13.5pt; padding-left: 13.5pt">Options exercisable</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,597,130</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1.31</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">286,400</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2.41</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: -13.5pt; padding-left: 13.5pt">Weighted-average fair value of options granted during the period</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.77</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.32</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: left; text-indent: 0.5in">At September 30, 2013,
the weighted average remaining contractual life of stock options outstanding and expected to vest is 7.5 years and the weighted
average remaining contractual life of stock options exercisable is 6 years. The aggregate outstanding stock options intrinsic value
of $484,950 is calculated as the difference between the exercise prices of all underlying outstanding stock options and the quoted
closing price of the common stock of the Company as of September 30, 2013 for those outstanding options that have an exercise price
below the quoted closing price.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: left; text-indent: 0.5in">As of September 30,
2013, the total compensation expense related to non-vested options not yet recognized totaled $854,570. The weighted-average vesting
period over which the total compensation expense related to non-vested options not yet recognized at September 30, 2013 was approximately
0.64 years.</p>
<p style="font: italic bold 8pt Times New Roman, Times, Serif; margin: 0 0 12pt">Warrants</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: left; text-indent: 0.5in">In February 2013, the
Company repurchased outstanding warrants to purchase an aggregate of 220,000 shares of the Company’s common stock at a purchase
price of $0.15 per share underlying the warrant. The warrants were issued in the Company’s initial public offering and had
an exercise price of $3.4375. The repurchased warrants were cancelled.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: left; text-indent: 0.5in">The following table
is the summary of warrants outstanding at September 30, 2013:</p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Number of Warrants</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Exercise Price</td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: center; border-bottom: Black 1pt solid">Expiration Date</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 22%; text-align: left; padding-left: 5.4pt">Issued to co-placement agents in connection with <br />previous convertible note financings</td><td style="width: 5%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 19%; text-align: right">18,250</td><td style="width: 1%; text-align: left"> </td><td style="width: 5%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 19%; text-align: right">7.84</td><td style="width: 1%; text-align: left"> </td><td style="width: 5%"> </td>
<td style="width: 21%; text-align: right; padding-left: 5.4pt"> <br />10/29/2014</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: 0in; padding-left: 5.4pt">Issued in connection with 2009 private placement</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">503,034</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3.4375</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; text-indent: 0in; padding-left: 5.4pt">10/29/2014</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; text-indent: 0in; padding-left: 5.4pt">Issued in connection with IPO</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,043,569</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3.4375</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; text-indent: 0in; padding-left: 5.4pt">3/24/2015</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Issued to IPO underwriters that, if exercised, would result <br />in the issuance of an additional 4,812 shares of <br />common stock and warrants to purchase an additional <br />2,406 shares of common stock</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,812</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3.90</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; padding-left: 5.4pt"> <br /> <br /> <br />3/24/2015</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Issued in connection with September 20, 2012 private <br />placement of convertible notes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,125,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.40</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; padding-left: 5.4pt"> <br />9/20/2017</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Issued to placement agent in connection with September <br />20, 2012 private placement of convertible notes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">15,420</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.40</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; padding-left: 5.4pt"> <br />9/20/2017</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Issued in connection with November 13, 2012 private <br />placement of convertible notes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">437,500</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.40</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; padding-left: 5.4pt"> <br />11/13/2017</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Issued to placement agent in connection with November <br />13, 2012 private placement of convertible notes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">85,167</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.40</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; padding-left: 5.4pt"> <br />11/13/2017</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Issued in connection with February 2013 private <br />placement</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">400,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.50</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; padding-left: 5.4pt"> <br />2/19/2018</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: 0in; padding-left: 5.4pt">Issued in connection with license agreement amendment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">125,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.50</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; text-indent: 0in; padding-left: 5.4pt">4/11/2018</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Issued in connection with July 2013 private <br />placement</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">227,273</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.50</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; padding-left: 5.4pt"> <br />7/30/2018</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Issued in connection with May 2013 private <br />placement of convertible notes</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1,000,000</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1.10</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: right; padding-bottom: 1pt; padding-left: 5.4pt"> <br />5/30/2019</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: 0in; padding-left: 5.4pt">Total warrants outstanding at September 30, 2013</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">8,985,025</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: right; padding-bottom: 2.5pt; text-indent: 0in; padding-left: 5.4pt"> </td></tr>
</table>
<p style="font: bold 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 11pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="margin: 0pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">In
April 2013, the Company entered into an amendment to the License and Assignment Agreement, dated January 30, 2008, between the
Company and ND Partners, LLC (“ND Partners”).  Under Article 6 of the License Agreement, the Company was
obligated to make a milestone payment of $500,000 to ND Partners upon the first issuance of a CE Mark certification for a licensed
product, which payment is payable to ND Partners within 30 days after such issuance.  Pursuant to the terms of the amendment,
the Company and ND Partners agreed to delay such milestone payment to a time, to be chosen by the Company, anytime within 12 months
after the achievement of such issuance.  As consideration for the amendment, the Company issued ND Partners a warrant
to purchase 125,000 shares of its common stock at an exercise price of $1.50 per share.  The warrant is exercisable
immediately upon issuance and has a term of five years.  The warrant contains a cashless exercise feature and standard
adjustment features in the event of a stock split, stock dividend, recapitalization or similar events. The Company recognized
$76,574 expense for the value of the warrants issued as a result of this amendment.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">In
February 2007, Geistlich Söhne AG für Chemische Industrie, Switzerland, or Geistlich, brought an action against the
Sodemann patent covering the Company’s Neutrolin® product candidate which is owned by ND Partners, LLC and licensed
to the Company pursuant to the License and Assignment Agreement between the Company and ND Partners LLC.  The action
that was brought against the Sodemann patent in Germany at the Board of the European Patent Office opposition division was for
lack of inventiveness in the use of citric acid and a pH value in the range of 4.5 to 6.5 with having the aim to provide an alternative
lock solution through having improved anticoagulant characteristics compared to the lock solutions described in the Lehner patent.  The
Board of the European Patent Office opposition division rejected the opposition by Geistlich.  On August 27, 2008, Geistlich appealed the
court's ruling, alleging the same arguments as presented during the opposition proceedings.  The Company filed a response
to the appeal of Geistlich on March 25, 2009 where the Company requested a dismissal of the appeal and to maintain the patent
as granted.  To date, no further petitions have been filed by ND Partners or Geistlich.  On October 10, 2012,
the Company became aware that the Board of Appeals of the European Patent Office issued on September 4, 2012, a summons for oral
proceedings.  On November 28, 2012, the Board of Appeals of the European Patent Office held oral proceedings and verbally
upheld the Sodemann patent covering Neutrolin®, but remanded the proceeding to the lower court to consider restricting certain
of the Sodemann patent claims.  The Company received the Appeals Board final written decision on March 28, 2013 which
was consistent with the oral proceedings.  In a letter dated September 30, 2013, the Company was notified that the opposition
division of the European Patent Office reopened the proceedings before the first instance again, and has given their preliminary
non-binding opinion that the patent as amended during the appeal proceedings fulfils the requirements of Clarity, Novelty, and
Inventive Step, and invited the parties to provide their comments and/or requests by February 10, 2014.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The Company
intends to continue to vigorously defend the patent in a restricted form.  However, the Company can provide no assurances
regarding the outcome of this matter.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">Navinta
LLC, a U.S.-based Active Pharmaceutical Ingredient (“API”) developer, provides API manufacturing (manufactured in
India at an FDA-compliant facility) and a Drug Master File for CRMD003, pursuant to a supply agreement dated December 7, 2009
(the “Navinta Agreement”). The Navinta Agreement provides that Navinta will supply taurolidine (the API for CRMD003)
to the Company on an exclusive worldwide basis in the field of the prevention and treatment of human infection and/or dialysis
so long as the Company purchased a minimum of $350,000 of product from Navinta by December 30, 2010, which the Company achieved,
and following the Company’s first commercial sale of a product incorporating taurolidine, purchase a minimum of $2,250,000
of product on an annual basis for five years. The Company is also required to make certain cash payments to Navinta upon the achievement
of certain sales-based milestones. The maximum aggregate amount of such payments, assuming achievement of all milestones, is $1,975,000.
The Navinta Agreement has a term of five years, but may be terminated by either party upon 30 days written notice.</font></p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc">The fair value of the Company’s cash, convertible
notes, and accounts payable at September 30, 2013 are estimated to approximate their carrying values due to the relative liquidity
and/or short-term nature of these instruments. The following table presents the fair value hierarchy, carrying amounts and fair
values of the Company’s financial instruments measured at fair value on a recurring basis as of September 30, 2013. There
were no financial instruments measured at fair value on a recurring basis at September 30, 2012.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="padding-bottom: 1.5pt"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center; vertical-align: bottom"><font style="font-size: 8pt; color: windowtext"><b>September 30, 2013</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt; text-align: center; vertical-align: bottom"> </td>
<td style="padding-bottom: 1.5pt; text-align: center; vertical-align: bottom"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; vertical-align: bottom"><font style="font-size: 8pt; color: windowtext"><b>Fair Value Hierarchy</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; text-align: center; vertical-align: bottom"> </td>
<td style="padding-bottom: 1.5pt; text-align: center; vertical-align: bottom"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; vertical-align: bottom"><font style="font-size: 8pt; color: windowtext"><b>Carrying Amount</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; text-align: center; vertical-align: bottom"> </td>
<td style="padding-bottom: 1.5pt; text-align: center; vertical-align: bottom"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; vertical-align: bottom"><font style="font-size: 8pt; color: windowtext"><b>Fair Value</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; text-align: center; vertical-align: bottom"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt; color: windowtext">Financial Liabilities Measured at Fair Value on a Recurring Basis</font>:</td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 67%"><font style="font-size: 8pt; color: windowtext">Convertible debt</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt; color: windowtext">3</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt; color: windowtext">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt; color: windowtext">1,113,900</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt; color: windowtext">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt; color: windowtext">1,113,900</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Warrants issued in connection with convertible
debt</p></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt; color: windowtext">3</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td><font style="font-size: 8pt; color: windowtext">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt; color: windowtext">582,800</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td><font style="font-size: 8pt; color: windowtext">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt; color: windowtext">582,800</font></td>
<td nowrap="nowrap"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc">On October 22, 2013, the Company concluded a sale
to existing institutional investors of 150,000 shares of Series C-1 Non-Voting Convertible preferred stock and 150,000 shares of
Series C-2 Non-Voting Convertible preferred stock, together with warrants to purchase up to an aggregate of 1,500,000 shares of
common stock, for aggregate gross proceeds of $3,000,000.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc">As a condition to the closing, the Company simultaneously
exchanged a 9% senior convertible note held by one of the investors in the principal amount of $400,000 for 57,400 shares of its
Series D Non-Voting Convertible Preferred Stock and exchanged an 8% senior convertible note held by the same investor in the principal
amount of $750,000 for 53,537 shares (including inducement shares) of its Series E Non-Voting Convertible Preferred Stock.  The
terms of the Series D and Series E Preferred Stock are designed to provide the holder of the notes exchanged with the similar economic
terms of the exchanged notes, including interest, dilution and other protections.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc">As an inducement to the transaction, the Company
also issued 1,667 shares of its Series E Non-Voting Convertible Preferred Stock to the other investor.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc">As a result of the financing, the anti-dilution
provisions of the 8% senior convertible notes and the warrants issued with them caused the conversion price of the 8% senior convertible
notes and the exercise price of the warrants to decrease from $1.10 to $1.00.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc">In October 2013, a portion of an 8% senior convertible
note in the principal amount of $93,750 was converted at a conversion price of $0.81 per share. This conversion, plus payment of
accrued interest in shares, resulted in the issuance of 118,440 shares of the Company’s common stock.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc">In October 2013, the Company granted to its various
consultants, ten-year non-qualified stock options under the 2013 Plan, covering an aggregate of 414,000 shares of the Company’s
common stock with an exercise price of $0.90 per share.  These options vest upon specified performance milestones.  The
Company will recognize the expense for these options when the subject performance milestones are achieved.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc">On November 13, 2013, the balance of 9% senior
convertible notes in the aggregate principal amount of $25,000 were converted at a conversion price of $0.35 per share resulting
in the issuance of an aggregate 71,428 shares of the Company’s common stock.</p>
<p style="margin: 0pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in">The preparation of financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts
of revenue and expenses during the reporting period. Actual results could differ from those estimates.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<p style="font: 8pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in">The consolidated financial
statements include the accounts of CorMedix Europe GmbH, a wholly owned subsidiary. All significant intercompany accounts and transactions
have been eliminated in consolidation.</p>
<p style="font: 8pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: left"><b><i> </i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">The consolidated financial
statements are presented in U.S. Dollars (USD), the reporting currency of the Company. For the financial statements of the Company’s
foreign subsidiary, whose functional currency is the USD, foreign currency asset and liability amounts, if any, are remeasured
into USD at end-of-period exchange rates, except for inventories, prepaid expenses, property, plant and equipment, goodwill and
other intangible assets, which are remeasured at historical rates. Foreign currency income and expenses are remeasured at average
exchange rates in effect during the year, except for expenses related to balance sheet amounts remeasured at historical exchange
rates. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are
included in income in the period in which they occur.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in">Basic earnings (loss) per common
share excludes any potential dilution and is computed by dividing net income (loss) by the weighted average number of common shares
outstanding during the period. Diluted earnings per common share reflect the potential dilution that could occur if securities
or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock
that then shared in the earnings of the entity. However, since their effect is anti-dilutive, the Company has excluded potentially
dilutive shares. The following potentially dilutive shares have been excluded from the calculation of diluted net loss per share
as their effect would be anti-dilutive.</p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 59%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: left; text-indent: 0in"> </td>
<td style="width: 19%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-indent: 0in"><font style="font-size: 8pt">September 30, 2013</font></td>
<td style="width: 3%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-indent: 0in"> </td>
<td style="width: 19%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-indent: 0in"><font style="font-size: 8pt">September 30, 2012</font></td></tr>
<tr style="vertical-align: top">
<td style="padding-top: 3pt; text-align: left; text-indent: 0in"><font style="font-size: 8pt">Convertible notes</font></td>
<td style="padding-top: 3pt; text-align: right; text-indent: 0in"><font style="font-size: 8pt">2,035,628</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: 0in"> </td>
<td style="padding-top: 3pt; text-align: right; text-indent: 0in"><font style="font-size: 8pt">2,428,571</font></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: left; text-indent: 0in"><font style="font-size: 8pt">Series B non-voting preferred stock</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: 0in"><font style="font-size: 8pt">454,546</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: 0in"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: 0in"><font style="font-size: 8pt">-</font></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: left; text-indent: 0in"><font style="font-size: 8pt">Shares underlying outstanding warrants</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: 0in"><font style="font-size: 8pt">8,985,025</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: 0in"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: 0in"><font style="font-size: 8pt">6,932,534</font></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: left; text-indent: 0in"><font style="font-size: 8pt">Shares underlying outstanding stock options</font></td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: 0in"><font style="font-size: 8pt">3,179,630</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: 0in"> </td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: 0in"><font style="font-size: 8pt">1,135,630</font></td></tr>
<tr style="vertical-align: top">
<td style="padding-top: 3pt; text-align: left; text-indent: 0in"><font style="font-size: 8pt">Total</font></td>
<td style="border-bottom: windowtext 1.5pt double; padding-top: 3pt; text-align: right; text-indent: 0in"><font style="font-size: 8pt">14,654,829</font></td>
<td style="padding-top: 3pt; text-align: right; text-indent: 0in"> </td>
<td style="border-bottom: windowtext 1.5pt double; padding-top: 3pt; text-align: right; text-indent: 0in"><font style="font-size: 8pt">10,496,735</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">Inventories are valued at
the lower cost or market on a first in, first out basis. Inventories consist of raw materials (including labeling and packaging),
work-in-process, and finished goods, if any, for the Neutrolin product. Inventories consist of the following:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">September 30, 2013</td></tr>
<tr style="vertical-align: bottom">
<td style="width: 70%; text-align: left; text-indent: 0in">Raw materials</td><td style="width: 10%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">216,916</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt; text-indent: 0in; padding-left: 5.4pt">Work-in-process</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">53,590</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: 0in">Total</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">270,506</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: italic bold 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in">Awards granted to employees,
officers and directors are measured at the grant date, based on the estimated fair value of the award, and stock-based compensation
cost, net of expected forfeitures, is recognized as expense over the requisite service period on a straight-line basis.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: left; text-indent: 0.5in">The Company accounts
for stock options granted to non-employees on a fair value basis using the Black-Scholes option pricing method. The non-cash charge
to operations for non-employee options with service vesting is revalued at the end of each reporting period based upon the change
in the fair value of the options and amortized to consulting expense over the related vesting period. For stock options granted
to non-employees with vesting contingent upon various performance metrics, the Company used the guidelines in accordance with FASB
ASC No. 505-50, “Equity-Based Payments to Non-Employees.” For options having performance conditions that are outside
of the control of the non-employee, the cost to be recognized is the lowest aggregate fair value prior to the achievement of the
performance condition, even if the Company believes it is probable that the performance condition will be achieved.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: left; text-indent: 0.5in">During the nine months
ended September 30, 2013 and 2012, options to purchase an aggregate of 1,400,000 and 380,000 shares of common stock, respectively,
were granted to the Company’s employees, officers, directors and consultants.</p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">September 30, 2013</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">September 30, 2012</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; text-align: left; text-indent: 0in">Convertible notes</td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 12%; text-align: right">2,035,628</td><td style="width: 1%; text-align: left"> </td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 12%; text-align: right">2,428,571</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: 0in; padding-left: 5.4pt">Series B non-voting preferred stock</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">454,546</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; text-indent: 0in; padding-left: 5.4pt">Shares underlying outstanding warrants</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">8,985,025</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,932,534</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt; text-indent: 0in; padding-left: 5.4pt">Shares underlying outstanding stock options</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">3,179,630</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1,135,630</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: 0in">Total</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">14,654,829</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">10,496,735</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">September 30, 2013</td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; text-align: left; text-indent: 0in">Raw materials</td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 12%; text-align: right">216,916</td><td style="width: 1%; text-align: left"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt; text-indent: 0in; padding-left: 5.4pt">Work-in-process</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">53,590</td><td style="padding-bottom: 1pt; text-align: left"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: 0in">Total</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">270,506</td><td style="padding-bottom: 2.5pt; text-align: left"> </td>
</tr>
</table>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">September 30, 2013</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">December 31, 2012</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; text-align: left; text-indent: 0in">Licensing fee</td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 12%; text-align: right">500,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 12%; text-align: right">—  </td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: 0in; padding-left: 5.4pt">Royalty fee</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">153,750</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">90,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; text-indent: 0in; padding-left: 5.4pt">Accrued payroll and payroll taxes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">134,562</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: 0in; padding-left: 5.4pt">Professional fees</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">108,532</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; text-indent: 0in; padding-left: 5.4pt">Accrued interest</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,455</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">10,763</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt; text-indent: 0in; padding-left: 5.4pt">Other</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">25,316</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">97,688</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: 0in">Total</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">830,083</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">306,983</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 1pt; padding-left: 5.75pt"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: center"><font style="font-size: 8pt"><u>September 20, 2012</u></font></td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: center"><font style="font-size: 8pt"><u>November 13, 2012</u></font></td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-left: 5.75pt">Contractual Term</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 8pt">5 years</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 8pt">5 years</font></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; text-align: justify; padding-left: 5.75pt">Volatility</td><td style="width: 2%"> </td>
<td style="width: 2%; text-align: left"> </td><td style="width: 17%; text-align: right">117.57</td><td style="width: 1%; text-align: left">%</td><td style="width: 2%"> </td>
<td style="width: 2%; text-align: left"> </td><td style="width: 17%; text-align: right">119.15</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-left: 5.75pt">Dividend yield</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.0</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.0</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-left: 5.75pt">Risk-free interest rate</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.70</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.63</td><td style="text-align: left">%</td></tr>
</table>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 5.75pt"> </td><td style="font-weight: bold"> </td>
<td style="font-weight: bold; text-align: left"> </td><td style="font-weight: bold; text-align: right"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Nine Months Ended</b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>September 30, 2013</u></b></p></td><td style="font-weight: bold; text-align: left"> </td><td style="font-weight: bold"> </td>
<td style="font-weight: bold; text-align: left"> </td><td style="font-weight: bold; text-align: right"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Nine Months Ended</b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>September 30, 2012</u></b></p></td><td style="font-weight: bold; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.75pt">Expected Term</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 8pt">2 - 10 years</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 8pt">5 years</font></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 5.75pt">Volatility</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 8pt">86% - 131%</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 8pt">98% - 115%</font></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 56%; text-align: left; padding-left: 5.75pt">Dividend yield</td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 12%; text-align: right">0.0</td><td style="width: 1%; text-align: left">%</td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 12%; text-align: right">0.0</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.75pt">Risk-free interest rate</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 8pt">0.34% - 2.78%</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 8pt">0.27% - 2.11%</font></td><td style="text-align: left"> </td></tr>
</table>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="7" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Nine Months Ended<br /> September 30, 2013</td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="7" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Nine Months Ended<br /> September 30, 2012</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="3" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares</td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="3" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted<br /> Average<br /> Exercise<br /> Price</td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="3" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares</td><td style="font-weight: bold; padding-bottom: 1pt"> </td>
<td colspan="3" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted<br /> Average<br /> Exercise<br /> Price</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 40%; text-indent: -13.5pt; padding-left: 13.5pt">Outstanding at beginning of period</td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 10%; text-align: right">2,135,630</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">1.26</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 10%; text-align: right">1,236,342</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">2.47</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-indent: -13.5pt; padding-left: 13.5pt">Forfeited</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(237,333</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">1.61</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(263,050</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">1.71</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-indent: -13.5pt; padding-left: 13.5pt">Expired/Canceled</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(118,667</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">1.61</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(217,662</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">3.13</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt; text-indent: -13.5pt; padding-left: 13.5pt">Granted</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1,400,000</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: left">$</td><td style="text-align: right">0.90</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">380,000</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: left">$</td><td style="text-align: right">0.38</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt; text-indent: -13.5pt; padding-left: 13.5pt">Outstanding at end of period</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">3,179,630</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: left">$</td><td style="text-align: right">1.06</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,135,630</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: left">$</td><td style="text-align: right">1.82</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: -13.5pt; padding-left: 13.5pt">Expected to vest</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">965,325</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: left">$</td><td style="text-align: right">0.81</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">875,958</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: left">$</td><td style="text-align: right">1.82</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: -13.5pt; padding-left: 13.5pt">Options exercisable</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,597,130</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1.31</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">286,400</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2.41</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: -13.5pt; padding-left: 13.5pt">Weighted-average fair value of options granted during the period</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.77</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.32</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="margin: 0pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">9% senior convertible notes,
related parties</font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">425,000</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Debt discount/beneficial
conversion feature</font></td>
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">(4,015</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Balance</font></td>
<td style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">420,985</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Accrued interest,
9% senior convertible notes related parties</font></td>
<td style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">14,262</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Accrued interest
9% senior convertible notes </font></td>
<td style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">4,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">8% senior convertible
notes at fair value</font></td>
<td style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext; letter-spacing: 9pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">311,900</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">8% senior convertible
notes at fair value, related party</font></td>
<td style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">802,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Accrued intest
- 8% Senior convertible notes, related party</font></td>
<td style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">5,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="margin: 0pt"></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Number of Warrants</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Exercise Price</td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: center; border-bottom: Black 1pt solid">Expiration Date</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 22%; text-align: left; padding-left: 5.4pt">Issued to co-placement agents in connection with <br />previous convertible note financings</td><td style="width: 5%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 19%; text-align: right">18,250</td><td style="width: 1%; text-align: left"> </td><td style="width: 5%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 19%; text-align: right">7.84</td><td style="width: 1%; text-align: left"> </td><td style="width: 5%"> </td>
<td style="width: 21%; text-align: right; padding-left: 5.4pt"> <br />10/29/2014</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: 0in; padding-left: 5.4pt">Issued in connection with 2009 private placement</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">503,034</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3.4375</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; text-indent: 0in; padding-left: 5.4pt">10/29/2014</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; text-indent: 0in; padding-left: 5.4pt">Issued in connection with IPO</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,043,569</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3.4375</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; text-indent: 0in; padding-left: 5.4pt">3/24/2015</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Issued to IPO underwriters that, if exercised, would result <br />in the issuance of an additional 4,812 shares of <br />common stock and warrants to purchase an additional <br />2,406 shares of common stock</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,812</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3.90</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; padding-left: 5.4pt"> <br /> <br /> <br />3/24/2015</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Issued in connection with September 20, 2012 private <br />placement of convertible notes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,125,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.40</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; padding-left: 5.4pt"> <br />9/20/2017</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Issued to placement agent in connection with September <br />20, 2012 private placement of convertible notes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">15,420</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.40</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; padding-left: 5.4pt"> <br />9/20/2017</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Issued in connection with November 13, 2012 private <br />placement of convertible notes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">437,500</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.40</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; padding-left: 5.4pt"> <br />11/13/2017</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Issued to placement agent in connection with November <br />13, 2012 private placement of convertible notes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">85,167</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.40</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; padding-left: 5.4pt"> <br />11/13/2017</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Issued in connection with February 2013 private <br />placement</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">400,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.50</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; padding-left: 5.4pt"> <br />2/19/2018</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: 0in; padding-left: 5.4pt">Issued in connection with license agreement amendment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">125,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.50</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; text-indent: 0in; padding-left: 5.4pt">4/11/2018</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Issued in connection with July 2013 private <br />placement</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">227,273</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.50</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; padding-left: 5.4pt"> <br />7/30/2018</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Issued in connection with May 2013 private <br />placement of convertible notes</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1,000,000</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1.10</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: right; padding-bottom: 1pt; padding-left: 5.4pt"> <br />5/30/2019</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: 0in; padding-left: 5.4pt">Total warrants outstanding at September 30, 2013</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">8,985,025</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: right; padding-bottom: 2.5pt; text-indent: 0in; padding-left: 5.4pt"> </td></tr>
</table>
14654829
10496735
2035628
454546
8985025
3179630
2428571
0
6932534
1135630
216916
0
53590
0
270506
0
153750
90000
134562
0
12000
108532
500000
0
4455
10763
25316
97688
P5Y
P5Y
1.1757
1.1915
0.00
0.00
.0070
.0063
0
664000
4000
10763
425000
660000
14262
16175
2 - 10 years
P5Y
.86
.98
1.31
1.15
0.00
0.00
.0034
.0027
.0278
.0211
3179630
2135630
1135630
1236342
1400000
380000
-237333
-263050
965325
875958
1597130
286400
1.06
1.26
1.82
2.47
7.84
3.4375
3.4375
3.9
0.4
0.4
0.4
0.4
1.5
1.5
1.5
1.1
0.90
0.38
1.61
1.71
0.81
1.82
1.31
2.41
0.77
0.32
-118667
-217662
1.61
3.13
8985025
18250
503034
4043569
4812
2125000
15420
437500
85167
400000
125000
227273
1000000
2014-10-29
2014-10-29
2015-03-24
2015-03-24
2017-09-20
2017-09-20
2017-11-13
2017-11-13
2018-02-19
2018-04-11
2018-07-30
2019-05-30
76574
0
76574
3087
1587
3087
523102
291833
846260
686250
0
686250
60000
0
60000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">As
of September 30, 2013, the Company invested in a twelve-month 0.14% certificate of deposit held by the bank as collateral for
a letter of credit in connection with the Company’s purchase of raw materials due to be delivered in the next twelve months.  The
certificate of deposit will terminate without penalties once the transaction covered by the letter of credit is completed.  The
certificate of deposit is recorded on the balance sheet as restricted cash.  The restricted cash account is
classified as current if at the end of the reporting period, the restriction is expected to be lifted in the next twelve months
or the contractual maturity date of the certificate of deposit is in the next twelve months.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">Accrued
expenses consist of the following:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext"><b>September
30, </b></font><font style="font: 8pt Times New Roman, Times, Serif"><br />
<font style="color: windowtext"><b>2013</b></font></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext"><b>December
31, </b></font><font style="font: 8pt Times New Roman, Times, Serif"><br />
<font style="color: windowtext"><b>2012</b></font></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Licensing fee</font></td>
<td style="width: 1%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">500,000</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">-</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Royalty fee</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">153,750</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">90,000</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Accrued payroll and payroll taxes</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">134,562</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">-</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Professional fees</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">12,000</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">108,532</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Accrued interest</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">4,455</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">10,763</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1pt"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Other</font></td>
<td style="text-align: right; padding-bottom: 1pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; border-bottom: Black 1pt solid"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">25,316</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; padding-bottom: 1pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; border-bottom: Black 1pt solid"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">97,688</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">Total</font></td>
<td style="padding-bottom: 0.25pc; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">830,083</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 0.25pc; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif; color: windowtext">306,983</font></td>
<td nowrap="nowrap" style="padding-bottom: 0.25pc"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 8pt Times New Roman, Times, Serif">As
permitted under FASB ASC 825, <i>Financial Instruments </i>(“ASC 825”), the Company has elected the fair value option
to account for its convertible notes that were issued during the quarter ended September 30, 2013.   ASC 825 requires
that the entity record the financial asset or financial liability at fair value rather than at historical cost with changes in
fair value recorded in the statement of operations.  In addition, it requires that upfront costs and fees related
to items for which the fair value option is elected be recognized in earnings as incurred and not deferred.</font></p>
45934
45934
0
0
45934
945892
945892
0
0
945892
220500
0
582800
-220500
0
-220500
5000
-33626
-33626
0
0
-33626