<SEC-DOCUMENT>0001683168-17-000850.txt : 20170407
<SEC-HEADER>0001683168-17-000850.hdr.sgml : 20170407
<ACCEPTANCE-DATETIME>20170407163623
ACCESSION NUMBER:		0001683168-17-000850
CONFORMED SUBMISSION TYPE:	424B3
PUBLIC DOCUMENT COUNT:		7
FILED AS OF DATE:		20170407
DATE AS OF CHANGE:		20170407

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			Sonoma Pharmaceuticals, Inc.
		CENTRAL INDEX KEY:			0001367083
		STANDARD INDUSTRIAL CLASSIFICATION:	PHARMACEUTICAL PREPARATIONS [2834]
		IRS NUMBER:				680423298
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0331

	FILING VALUES:
		FORM TYPE:		424B3
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-200461
		FILM NUMBER:		17750192

	BUSINESS ADDRESS:	
		STREET 1:		1129 N. MCDOWELL BLVD.
		CITY:			PETALUMA
		STATE:			CA
		ZIP:			94954
		BUSINESS PHONE:		707-283-0550

	MAIL ADDRESS:	
		STREET 1:		1129 N. MCDOWELL BLVD.
		CITY:			PETALUMA
		STATE:			CA
		ZIP:			94954

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	Oculus Innovative Sciences, Inc.
		DATE OF NAME CHANGE:	20060622
</SEC-HEADER>
<DOCUMENT>
<TYPE>424B3
<SEQUENCE>1
<FILENAME>sonoma_424b3-200461.htm
<DESCRIPTION>PROSPECTUS FILED PURSUANT TO RULE 424(B)(3)
<TEXT>
<HTML>
<HEAD>
     <TITLE></TITLE>
</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0; text-align: right"><B>Filed Pursuant to Rule 424(b)3</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right"><B>Registration No. 333-200461</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><B>$6,250,000</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><IMG SRC="logo.jpg" ALT=""></P>

<P STYLE="font: 16pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><B>SONOMA PHARMACEUTICALS,
INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><B>1,250,000 Shares
of Common Stock and</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><B>Warrants to Purchase
1,078,125 Shares of Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We previously offered 1,250,000 shares of our
common stock, $0.0001 par value per share, together with warrants to purchase 937,500 shares of our common stock, as adjusted for
the reverse split of our commons stock effected on June 24, 2016. Five shares of common stock were sold together with 3.75 of a
warrant. On January 21, 2015, the underwriters exercised an over-allotment option and purchased additional warrants to purchase
140,625 additional shares of common stock from us at the offering price for each security, less underwriting discounts and commissions.
Five warrants are exercisable for one share of common stock at an exercise price of $6.50&nbsp;per share commencing upon consummation
of this offering and terminating on the fifth anniversary of the date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="background-color: white">All costs
associated with this registration will be borne by us. Our common stock is traded on The NASDAQ Capital Market under the trading
symbol &ldquo;SNOA.&rdquo;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The warrants issued in this offering began
trading on The NASDAQ Capital Market on January 21, 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="background-color: white">None
of our other warrants are listed or traded on a national securities exchange or market. On </FONT>April 6<FONT STYLE="background-color: white">,
2017, the last reported sale price of our common stock on The NASDAQ Capital Market was $6.86 per share. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: bottom; width: 54%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">Per 5 Shares*</FONT></TD>
    <TD STYLE="vertical-align: top; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 4%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">Per 3.75 of a Warrant (1)*</FONT></TD>
    <TD STYLE="vertical-align: top; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 3%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total*</B></FONT></TD>
    <TD STYLE="vertical-align: top; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 3%">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="background-color: #EEEEEE">
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">Public offering price</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">4.95</FONT></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">0.05</FONT></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">5.00</FONT></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">Underwriter discounts and commissions (2)</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">0.396</FONT></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">(4)</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">0.004</FONT></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">(4)</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">0.40</FONT></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">(4)</FONT></TD></TR>
<TR STYLE="background-color: #EEEEEE">
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">Proceeds, before expenses, to us (3)</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">4.554</FONT></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">(4)</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">0.046</FONT></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">(4)</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">4.60</FONT></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">(4)</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.3pt; text-align: justify">*All share numbers and share prices
have been adjusted to reflect the reverse stock split effective June 24, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.3pt; text-align: justify">(1) Five shares of common stock
were sold together with 3.75 of a warrant, with each five warrants being exercisable for the purchase of one share of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.3pt; text-align: justify">(2) We issued warrants to the
underwriters to reimburse the underwriters for certain expenses. See &ldquo;Underwriting - Other Terms&rdquo; on page <A HREF="#a28">76</A> of this
prospectus for a description of these arrangements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.3pt; text-align: justify">(3) We estimate the total
expenses of this offering were approximately $485,000. See &ldquo;Underwriting - Commissions&rdquo; on page <A HREF="#a29">74</A> of this
prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.3pt; text-align: justify">(4) The underwriter discounts and
commissions for each five shares together with 3.75 of a warrant were $0.40, or $500,000 in the aggregate. The total proceeds,
before expenses, to us from the sale of the shares together with the warrants were $5,750,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.3pt; text-align: justify">The underwriters delivered the
securities, against payment, on or about January 26, 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><B>THIS INVESTMENT
INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><B>SECURITIES ONLY
IF YOU CAN AFFORD A COMPLETE LOSS.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in; background-color: white"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><B>SEE &ldquo;RISK
FACTORS&rdquo; BEGINNING ON PAGE <A HREF="#a2">5</A>.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><B>We do not intend
to sell any more shares of Common Stock or Warrants.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a criminal offense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: center"><I>Sole Book-Running Manager</I></P>

<P STYLE="font: 14pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><B>Maxim Group LLC</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: center"><I>Co-Manager</I></P>

<P STYLE="font: 14pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Dawson James Securities, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white">The date of this prospectus
supplement is April 7, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"></P>

<!-- Field: Page; Sequence: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">&nbsp;</TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><B>TABLE OF CONTENTS</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 93%">&nbsp;</TD>
    <TD STYLE="width: 7%; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">Page</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a1"><FONT STYLE="font-size: 10pt">Prospectus Summary</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;1</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a2"><FONT STYLE="font-size: 10pt">Risk Factors</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;5</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a_001"><FONT STYLE="font-size: 10pt">Cautionary Statement concerning Forward-looking Statements</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">20</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a3"><FONT STYLE="font-size: 10pt">Use of Proceeds</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">20</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a4"><FONT STYLE="font-size: 10pt">Dilution</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">2</FONT>1</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a5"><FONT STYLE="font-size: 10pt">Price Range of our Common Stock</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">22</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a6"><FONT STYLE="font-size: 10pt">Dividend Policy</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">22</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a7"><FONT STYLE="font-size: 10pt">Capitalization</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">23</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><A HREF="#a8"><FONT STYLE="font-size: 10pt">Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">23</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a9"><FONT STYLE="font-size: 10pt">Our Business</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">37</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a10">Our Products</A></TD>
    <TD STYLE="text-align: center">40</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a11"><FONT STYLE="font-size: 10pt">Management</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">53</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a12"><FONT STYLE="font-size: 10pt">Certain Relationships and Related Transactions</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">64</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a13"><FONT STYLE="font-size: 10pt">Security Ownership of Certain Beneficial Owners and Management</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">71</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a14"><FONT STYLE="font-size: 10pt">Description of Securities</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">72</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a15"><FONT STYLE="font-size: 10pt">Underwriting</FONT></A></TD>
    <TD STYLE="text-align: center">74</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a16"><FONT STYLE="font-size: 10pt">Legal Matters</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">77</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a17"><FONT STYLE="font-size: 10pt">Experts</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">77</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a18"><FONT STYLE="font-size: 10pt">Interests of Named Experts and Counsel</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">77</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a19"><FONT STYLE="font-size: 10pt">Where You Can Find More Information</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">77</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><A HREF="#a20"><FONT STYLE="font-size: 10pt">Disclosure of Commission Position on Indemnification for Securities Act Liabilities</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">78</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="#a21"><FONT STYLE="font-size: 10pt">Financial Statements</FONT></A></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">F-1</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>


<!-- Field: Page; Sequence: 2 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: LowerRoman; Value: 1; Name: PageNo -->i<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><B>SONOMA PHARMACEUTICALS,
INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="a1"></A>PROSPECTUS SUMMARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The following information
is a summary of the prospectus and it does not contain all of the information you should consider before making an investment decision.
You should read the entire prospectus carefully, including the financial statements and the notes relating to the financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B>OUR BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We are a specialty pharmaceutical company dedicated
to identifying, developing and commercializing unique, affordable differentiated therapies to improve the lives of patients with
dermatologic diseases or conditions. Our products, which are sold throughout the United States and internationally, have improved
patient outcomes for more than five million patients globally by treating and reducing certain topical skin diseases including
acne, atopic dermatitis, scarring, infections, itch, pain and harmful inflammatory responses. On December 6, 2016, we changed our
name from Oculus Innovative Sciences, Inc. to Sonoma Pharmaceuticals, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We currently focus on the development and commercialization
of therapeutic solutions in medical dermatology to treat or reduce skin conditions, such as acne, atopic dermatitis and scarring.
These diseases impact millions of patients worldwide and can have significant, multi-dimensional effects on patients&rsquo; quality
of life, including their physical, functional and emotional well-being.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Since our founding in 1999, we built our business
by developing and promoting products via partnerships for multiple therapeutic indications, with a primary focus on advanced tissue
care. Starting in 2013, with a new Board of Directors and new management team, we pivoted to focus on one specialty pharmaceutical
area, medical dermatology, and created our own sales force in the United States to promote our unique, affordable, differentiated
prescription dermatology products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Some of our key products in the United States
are:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Celacyn&reg;, a prescription hypochlorous acid based scar management gel clinically proven to soften and flatten raised scars while reducing redness and discoloration.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Ceramax&trade; Skin Barrier Cream helps manage dry itchy skin, minor skin irritations, rashes, and inflammation caused by various skin conditions.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Alevicyn&trade;, a prescription hypochlorous acid based atopic dermatitis product line clinically proven to reduce pruritus (itch) and pain associated with various dermatoses.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Mondoxyne&trade;, a prescription oral tetracycline antibiotic used for the treatment of certain bacterial infections, including acne. </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Microcyn&reg; (sold under a variety of brand names), a line of products based on electrically charged oxychlorine small molecules designed to target a wide range of pathogens including viruses, fungi, spores and bacteria, including antibiotic-resistant strains.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our key product outside the United States is:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Microcyn&reg; or Microdacyn60&reg; (sold under a variety of brand names), a line of products based on electrically charged oxychlorine small molecules designed to target a wide range of pathogens including viruses, fungi, spores and bacteria, including antibiotic-resistant strains.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">To date, we have obtained 16 clearances from
the U.S. Food and Drug Administration, or FDA, that permit us to sell our products as medical devices for Section 510(k) of the
Federal Food, Drug and Cosmetic Act in the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Outside the United Sates, we sell products
for dermatological and advanced tissue care with a European Conformity marking (known as Conformit&eacute; Europ&eacute;enne or
CE) covering 25 of our products, and various approvals in China, Southeast Asia, South Korea, India, Australia, New Zealand, and
the Middle East.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 3; Options: NewSection; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">On October 27, 2016,
we, along with our Mexican subsidiary and manufacturer Oculus Technologies of Mexico, S.A. de C.V., closed on an asset purchase
agreement with Invekra, S.A.P.I de C.V., an affiliate of Laboratorios Sanfer S.A. de C.V., for the sale of certain of our Latin
America assets. Specifically, we agreed to sell certain patents, patent applications, trademarks and territory rights for Mexico,
the Caribbean and South America, excluding the sale of dermatology products in Brazil, as well as to build and deliver equipment
that Invekra will use to produce its own product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The aggregate purchase price that Invekra will
pay for the assets is $22,000,000, of which $18,000,000 was paid upon closing, $1,500,000 was held in escrow until completion of
our obligation to deliver certain equipment and paid to us on March 16, 2017, and $2,500,000 will be paid in Mexican currency in
quarterly installments over a period of ten years from closing as consideration for the provision of certain services and providing
technical assistance, calculated as three per cent on net sales of certain products in Latin America, excluding Mexico. Since the
$2,500,000 is to be paid in foreign currency, we may receive more or less than $2,500,000 due to currency fluctuations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a result of the asset purchase agreement
and arrangement, we expect our revenues in Latin America will decrease significantly. Pursuant to the arrangement, going forward
we will receive a royalty of 3% on all Latin American net revenues (outside of Mexico), with a minimum payment of $250,000 per
year for the next ten years, to be paid quarterly in Mexican pesos. Due to currency fluctuations, we may not receive the full $250,000
in U.S. dollars. Additionally, while Invekra sets up their manufacturing, we will continue to supply Invekra with product at a
reduced price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We believe that the sale of the Latin America
assets is in line with our overall turnaround strategy to focus on our core dermatology business and generate cash from our non-core
businesses to support the higher margin and higher-growth dermatology business. As a result of the sale of our Latin America assets,
we expect our Latin America revenues will decrease and our total revenues will decrease in the short-term until our U.S. based
dermatology revenues increase longer-term. We believe focusing on higher margin dermatology products, utilizing an internal sales
force, allows us to better control and grow our future results rather than relying on external partners for marketing and sales.
We intend to use the proceeds from the sale of the Latin America assets to increase our direct sales force and grow our product
line and continue to expand our markets and Company.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Our Strategy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our strategy is to in-license, acquire, develop
and commercialize unique, affordable and differentiated therapies that we believe advance the standard of care for patients with
dermatological diseases. The key components of our strategy are to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>Expand our Internal U.S. Sales Force:</B> We continue to hire additional experienced sales people who have established relationships with&nbsp;dermatologists in their territories and are expecting to have a sales force of 30 by the end of April 2017.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>Develop and Launch New Dermatology Products:</B> We currently sell eight prescription dermatology&nbsp;products in the United States, and have a strong product pipeline of new products, including an oral anti-infective for severe acne and Ceramax&trade;, which utilizes a &ldquo;state of the art&rdquo; skin repair technology.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>Create a Competitive Pricing Strategy:</B> We have and will continue to develop a unique product pricing&nbsp;strategy, which we believe solves many of the challenges associated with the prescription dermatology market&rsquo;s current pricing&nbsp;and rebate programs.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>Develop a Pharmaceutical Line:</B> We plan to acquire or develop pharmaceutical products with affordable clinical trials to increase our market&nbsp;presence and create innovator patent protection.&nbsp;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our plan is to evolve into a leading dermatology
company, providing innovative and cost-effective solutions to patients, while generating strong,&nbsp;consistent revenue growth
and maximizing long-term shareholder value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 4; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B>THE OFFERING</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: top; width: 51%"><FONT STYLE="font-size: 10pt">Common stock outstanding as of January 13, 2015 (1)</FONT></TD>
    <TD STYLE="width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 48%; text-align: justify"><FONT STYLE="font-size: 10pt">1,732,116 shares </FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Common Stock issued on January 26, 2015</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">1,250,000 shares</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Common Stock issued pursuant to the </FONT><BR>
<FONT STYLE="font-size: 10pt">over-allotment option on March 6, 2015</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">26,900 shares</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Warrants issued on January 26, 2015</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">4,687,500 warrants to purchase an aggregate of 937,500 shares</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Warrants issued pursuant to the </FONT><BR>
<FONT STYLE="font-size: 10pt">over-allotment option on January 26, 2015</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">703,125 warrants to purchase an aggregate of 140,625 shares</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: top; width: 51%"><FONT STYLE="font-size: 10pt">Description of Warrants</FONT></TD>
    <TD STYLE="width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 48%; text-align: justify"><FONT STYLE="font-size: 10pt">Each five warrants entitle the holder to purchase one share of common stock at a purchase price equal to $6.50 per share, at any time commencing upon consummation of this offering and terminating on the fifth anniversary of the date of issuance. See &ldquo;<I>Description of Securities &ndash; Warrants</I>.&rdquo;</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Underwriters&rsquo; Over Allotment Option</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">The underwriting agreement provided that we grant to the underwriters an option, exercisable within 45 days after the closing of this offering, to acquire an additional 15% of the total number of shares of common stock and/or warrants to be offered by us pursuant to this offering, solely for the purpose of covering over-allotments. </FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Use of Proceeds</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0.45pt"><FONT STYLE="font-size: 10pt">We intend to use the proceeds from the sale of the shares and from the exercise of warrants, if any, to increase our direct sales force, to develop and launch new products and for general working capital. See &ldquo;<I>Use of Proceeds</I>.&rdquo;</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Stock Symbol</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">SNOA</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Stock Symbol for the Warrants</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">SNOAW </FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Risk Factors</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Investing in our securities involves substantial risks. You should carefully review and consider the &ldquo;<I>Risk Factors</I>&rdquo; section of this prospectus beginning on page <A HREF="#a2">5</A> and the other information in this prospectus for a discussion of the factors you should consider before you decide to invest in this offering.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-size: 10pt">(1)</FONT></TD>
    <TD STYLE="width: 94%; text-align: justify"><FONT STYLE="font-size: 10pt">Excludes shares of common stock issuable upon exercise of 571,933 outstanding options and 406,333 warrants as of January 13, 2015. </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>


<!-- Field: Page; Sequence: 5; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->3<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>SUMMARY FINANCIAL INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Because this is only a summary of our financial
information, it does not contain all of the financial information that may be important to you. Therefore, you should carefully
read all of the information in this prospectus and any prospectus supplement, including the financial statements and their explanatory
notes and the section entitled &ldquo;<I>Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations</I>,&rdquo;
before making a decision to invest in our common stock. The information contained in the following summary is derived from our
audited, consolidated financial statements for the fiscal years ended March 31, 2016 and 2015, and the unaudited condensed consolidated
financial statements for the nine months ended December 31, 2016 and 2015 (in thousands, except share and per share amounts).&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Nine Months Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">(unaudited)</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 46%; text-align: left; padding-left: 10pt; text-indent: -10pt">Total revenues</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">8,796</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">6794</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Total cost of revenues</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,075</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,117</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Gross profit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,721</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,677</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Operating expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Research and development</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,226</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,365</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Selling, general and administrative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,557</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,411</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Total operating expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13,783</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,776</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Loss from operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,565</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,189</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Income (loss) from continuing operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">763</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,214</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Income from discontinued Operations (net of tax)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,465</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,065</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">Net income (loss)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,710</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(7,252</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-left: 10pt; text-indent: -10pt">Net income (loss) per common share: basic and diluted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Continuing operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.18</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(1.28</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Discontinued operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.66</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.32</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3.84</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.96</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt"></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid"><B>March 31,</B></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><B>2016</B></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><B>2015</B></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center"></TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">(unaudited)</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: justify">Balance Sheet Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 49%; text-align: justify; text-indent: 12.05pt">Cash and cash equivalents</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">18,983</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">7,469</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">6,136</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: justify; text-indent: 12.05pt">Working capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21,374</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,337</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,066</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; text-indent: 12.05pt">Total assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27,507</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13,803</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,048</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; text-indent: 12.05pt">Accumulated deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(140,665</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(152,375</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(142,213</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-bottom: 2.5pt; text-indent: 12.05pt">Total stockholders&rsquo; equity</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">22,863</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,140</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">12,054</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 6; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 0.8pt; text-align: center; text-indent: -0.5pt"><B><A NAME="a2"></A>RISK FACTORS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Investing in our securities involves a high
degree of risk. This prospectus contains a discussion of risks applicable to an investment in the securities offered. Prior to
making a decision about investing in our securities, you should carefully consider the specific factors discussed below together
with all of the other information contained in this prospectus or appearing or incorporated by reference in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.35pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Risks Related to Our Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We have a history of losses, we expect
to continue to incur losses and we may never achieve profitability and our March 31, 2016 audited consolidated financial statements
included disclosure that casts substantial doubt regarding our ability to continue as a going concern.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We reported a net loss of $10,162,000 and $8,203,000
and for the year ended March 31, 2016 and 2015, respectively. At March 31, 2016 and 2015, our accumulated deficit amounted to $152,375,000
and $142,213,000, respectively. We had working capital of $9,337,000 and $7,066,000 as of March 31, 2016 and 2015, respectively.
During the year ended March 31, 2016 and 2015, net cash used in operating activities amounted to $8,746,000 and $6,694,000, respectively.
We reported a net income of $11,710,000 for the nine months ended December 31, 2016. At December 31, 2016, our accumulated deficit
amounted to $140,665,000. At December 31, 2016, our working capital amounted to $21,374,000. We expect to continue incurring losses
from our continuing operations for the foreseeable future and may never achieve or sustain profitability. We must raise additional
capital to pursue our product development initiatives, penetrate markets for the sale of our products and continue as a going concern.
We cannot provide any assurance that we will raise additional capital. We believe that we have access to capital resources through
possible public or private equity offerings, debt financings, corporate collaborations or other means. We may not raise enough
capital in this offering to meet our needs and we may have to raise additional capital in the future. If we are unable to secure
additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce
costs in order to conserve our cash in amounts sufficient to sustain operations and meet our obligations. These measures could
cause significant delays in our efforts to further commercialize our products, which are critical to the realization of our business
plan and to our future operations. These matters raise substantial doubt about our ability to continue as a going concern or become
profitable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Because our revenues from the Latin America
assets sold to Invekra on October 27, 2016, represented approximately 38% of our reported total consolidated revenues during the
fiscal year ended March 31, 2016, our business following the sale transaction may be substantially reduced and less diversified.
</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenues from our Latin America business that
we sold to Invekra on October 27, 2016, represented approximately 38% of our total consolidated revenues during fiscal year 2016.
We will continue to supply products at a reduced price from list prices to Invekra and Sanfer pursuant to our contractual obligations
for a transition period of no more than two years while Invekra builds its own manufacturing lines. However, we expect that our
future revenues from Latin America sales will be substantially reduced which may adversely affect our results of operations and
financial condition. We intend to use the proceeds from the sale of the assets to grow our U.S. dermatology business. However,
we may encounter unanticipated difficulties or challenges as we continue to develop our U.S. dermatology business and internal
sales force. We may not be able to grow our dermatology business fast enough to offset the loss of revenue from Latin American
sales, or at all. If we are unable to increase our dermatology revenues or international sales, our results of operations and financial
condition may be adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We will have broad discretion in how
we use the proceeds from the Latin America asset sale to Invekra, and we may use the proceeds in ways in which our stockholders
may disagree.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We received an aggregate purchase price that
Invekra will pay for the assets of $22,000,000, with $18,000,000 paid in cash upon closing, $1,500,000 was held in escrow until
completion of our obligation to deliver certain equipment and paid to us on March 16, 2017, and future variable consideration representing
3% of net sales of certain products in Latin America, excluding Mexico (with a minimum guaranteed payment of $2,500,000) to be
paid in Mexican currency in quarterly installments over a period of ten years from closing. Because the $2,500,000 is to be paid
in foreign currency, we may receive more or less than $2,500,000 due to such exposures. We intend to use the proceeds from the
sale to grow our U.S. dermatology business, such as among others, to increase our direct sales force, to develop and launch new
products and for general working capital. Our management will have broad discretion in the application of the proceeds from the
asset sale and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common
stock. We cannot guarantee that our efforts to grow our U.S. dermatology business will succeed and result in increased sales or
revenues. The failure by management to apply the proceeds effectively could result in financial losses that could have a material
adverse effect on our business or cause the price of our common stock to decline.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 7; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>If we are unable to expand our direct
domestic sales force, we may not be able to successfully sell our products in the United States.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We currently use a direct sales force to sell
our products in the dermatology markets. Expanding our sales force is expensive and time consuming, and the lack of qualified sales
personnel could delay or limit the success of our product launch in the United States. Our domestic sales force competes with the
sales operations of our competitors, which are better funded and more experienced. We may not be able to expand our domestic sales
capacity on a timely basis, or in the markets that we desire, or at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We do not have the necessary regulatory
approvals to market Microcyn</I>&reg; <I>as a drug in the United States.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have obtained sixteen 510(k) clearances
in the United States that permit us to sell Microcyn&reg;-based and other products as medical devices. However, before we are permitted
to sell Microcyn&reg; as a drug in the United&nbsp;States, we must, among other things, successfully complete additional preclinical
studies and well-controlled clinical trials, submit a new drug application to the FDA and obtain FDA approval.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The FDA approval process is expensive and uncertain,
requires detailed and comprehensive scientific and other data and generally takes several years. Despite the time and expense exerted,
approval is never guaranteed. Even if we obtain FDA approval to sell Microcyn&reg; as a drug, we may not be able to successfully
commercialize Microcyn&reg; as a drug in the United States and may never recover the substantial costs we have invested in the
development of our Microcyn&reg;-based products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Delays or adverse results in clinical
trials could result in increased costs to us and could delay our ability to generate revenue.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Clinical trials can be long and expensive,
and the outcome of clinical trials is uncertain and subject to delays. It may take several years to complete clinical trials, if
at all, and a product candidate may fail at any stage of the clinical trial process. The length of time required varies substantially
according to the type, complexity, novelty and intended use of the product candidate. Interim results of a preclinical study or
clinical trial do not necessarily predict final results, and acceptable results in preclinical studies or early clinical trials
may not be repeatable in later subsequent clinical trials. The commencement or completion of any of our clinical trials may be
delayed or halted for a variety of reasons, including the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">insufficient funds to continue our clinical trials;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">changes in the FDA requirements for approval, including requirements for testing efficacy and safety;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">delay in obtaining or failure to obtain FDA or other regulatory authority approval of a clinical trial protocol;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 40.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">patients not enrolling in clinical trials at the rate we expect;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">delays in reaching agreement on acceptable clinical trial agreement terms with prospective sites;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">delays in obtaining institutional review board approval to conduct a study at a prospective site;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">third party clinical investigators not performing our clinical trials on our anticipated schedule or performance is not consistent with the clinical trial protocol and good clinical practices, or the third party organizations not performing data collection and analysis in a timely or accurate manner; and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">changes in governmental regulations or administrative actions.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We do not know whether future clinical trials
will demonstrate safety and efficacy sufficiently to result in additional FDA approvals. While a number of physicians have conducted
clinical studies assessing the safety and efficacy of Microcyn&reg; for various indications, the data from these studies are not
sufficient to support approval of Microcyn&reg; as a drug in the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 8; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Clinical trials involve a lengthy and
expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The results of preclinical studies and early
clinical trials of new drugs do not necessarily predict the results of later-stage clinical trials. The design of our clinical
trials is based on many assumptions about the expected effects of our product candidates, and if those assumptions are incorrect,
the trials may not produce statistically significant results. Preliminary results may not be confirmed upon full analysis of the
detailed results of an early clinical trial. Product candidates in later stages of clinical trials may fail to show safety and
efficacy sufficient to support intended use claims despite having progressed through initial clinical testing. The data collected
from clinical trials of our product candidates may not be sufficient to obtain regulatory approval in the United States or elsewhere.
Because of the uncertainties associated with drug development and regulatory approval, we cannot determine if or when we will have
an approved product for commercialization or achieve sales or profits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>If we fail to obtain, or experience significant
delays in obtaining, additional regulatory clearances or approvals to market our current or future products, we may be unable to
commercialize these products.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The developing, testing, manufacturing, marketing
and selling of medical technology products is subject to extensive regulation by numerous governmental authorities in the United
States and other countries. The process of obtaining regulatory clearance and approval of medical technology products is costly
and time consuming. Even though their underlying product formulations may be the same or similar, our products are subject to different
regulations and approval processes depending upon their intended use.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">To obtain regulatory approval of our products
as drugs in the United States, we must first show that our products are safe and effective for target indications through preclinical
studies consisting of laboratory and animal testing and clinical trials consisting of human testing. The FDA generally clears marketing
of a medical device through the 510(k) pre-market clearance process if it is demonstrated the new product has the same intended
use and the same or similar technological characteristics as another legally marketed Class&nbsp;II device, such as a device already
cleared by the FDA through the 510(k) premarket notification process, and otherwise meets the FDA&rsquo;s requirements. Product
modifications, including labeling the product for a new intended use, may require the submission of a new 510(k) clearance and
FDA approval before the modified product can be marketed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The outcomes of clinical trials are inherently
uncertain. In addition, we do not know whether the necessary approvals or clearances will be granted or delayed for future products.
The FDA could request additional information, changes to product formulation(s) or clinical testing that could adversely affect
the time to market and sale of products as drugs. If we do not obtain the requisite regulatory clearances and approvals, we will
be unable to commercialize our products as drugs or devices and may never recover any of the substantial costs we have invested
in the development of Microcyn&reg;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Distribution of our products outside the United
States is subject to extensive government regulation. These regulations, including the requirements for approvals or clearance
to market; the time required for regulatory review and the sanctions imposed for violations, vary from country to country. We do
not know whether we will obtain regulatory approvals in such countries or that we will not be required to incur significant costs
in obtaining or maintaining these regulatory approvals. In addition, the export by us of certain of our products that have not
yet been cleared for domestic commercial distribution may be subject to FDA export restrictions. Failure to obtain necessary regulatory
approvals, the restriction, suspension or revocation of existing approvals or any other failure to comply with regulatory requirements
would have a material adverse effect on our future business, financial condition, and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>If our products do not gain market acceptance,
our business will suffer because we might not be able to fund future operations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A number of factors may affect the market acceptance
of our products or any other products we develop or acquire, including, among others:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">the price of our products relative to other products for the same or similar treatments;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">the perception by patients, physicians and other members of the healthcare community of the effectiveness and safety of our products for their indicated applications and treatments;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 9; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">changes in practice guidelines and the standard of care for the targeted indication;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">our ability to fund our sales and marketing efforts; and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">the effectiveness of our sales and marketing efforts or our partners&rsquo; sales and marketing efforts.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our ability to effectively promote and sell
any approved products will also depend on pricing and cost-effectiveness, including our ability to produce a product at a competitive
price and our ability to obtain sufficient third-party coverage or reimbursement, if any. In addition, our efforts to educate the
medical community on the benefits of our product candidates may require significant resources, may be constrained by FDA rules
and policies on product promotion, and may never be successful. If our products do not gain market acceptance, we may not be able
to fund future operations, including developing, testing and obtaining regulatory approval for new product candidates and expanding
our sales and marketing efforts for our approved products, which would cause our business to suffer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>If our competitors develop products similar
to Microcyn</I></B>&reg;<B><I>, we may need to modify or alter our business strategy, which may delay the achievement of our goals.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Competitors have and may continue to develop
products with similar characteristics to Microcyn&reg;. Such similar products marketed by larger competitors can hinder our efforts
to penetrate the market. As a result, we may be forced to modify or alter our business and regulatory strategy and sales and marketing
plans, as a response to changes in the market, competition and technology limitations, among others. Such modifications may pose
additional delays in achieving our goals.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We depend on third parties and intend
to continue to license or collaborate with third parties in various potential markets, and events involving these strategic partners
or any future collaboration could delay or prevent us from developing or commercializing products.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our business strategy and our short- and long-term
operating results depend in part on our ability to execute on existing strategic collaborations and to license or partner with
new strategic partners. We believe collaborations allow us to leverage our resources and technologies and to access markets that
are compatible with our own core areas of expertise while avoiding the cost of establishing or maintaining a direct sales force
in each market. We may incur significant costs in the use of third parties to identify and assist in establishing relationships
with potential collaborators. We currently have a small direct sales force, which sells our products in the tissue care, dermatology,
and women&rsquo;s health markets, and we intend to slowly expand the geographical coverage of our direct sales force.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">To penetrate our target markets, we may need
to enter into additional collaborative agreements to assist in the development and commercialization of products. For example,
depending upon our analysis of the time and expense involved in obtaining FDA approval to sell a product to treat open wounds,
we may choose to license our technology to a third party as opposed to pursuing commercialization ourselves. Establishing strategic
collaborations is difficult and time-consuming. Potential collaborators may reject collaborations based upon their assessment of
our financial, regulatory or intellectual property position and our internal capabilities. Our discussions with potential collaborators
may not lead to the establishment of new collaborations on favorable terms and may have the potential to provide collaborators
with access to our key intellectual property filings and next generation formations. We have limited control over the amount and
timing of resources that our current collaborators or any future collaborators devote to our collaborations or potential products.
These collaborators may breach or terminate their agreements with us or otherwise fail to conduct their collaborative activities
successfully and in a timely manner. Further, our collaborators may not develop or commercialize products that arise out of our
collaborative arrangements or devote sufficient resources to the development, manufacture, marketing or sale of these products.
By entering into collaboration, we may preclude opportunities to collaborate with other third parties who do not wish to associate
with our existing third party strategic partners. Moreover, in the event of termination of a collaboration agreement, termination
negotiations may result in less favorable terms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 10; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Our dependence on a commission-based
sales force and distributors for sales could limit or prevent us from selling our products in certain markets.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We currently depend on a commission-based sales
force and distributors to sell Microcyn&reg; in the United States, Europe and other countries, and intend to continue to sell our
products primarily through a commission-based sales force and distributors in Europe and the United States for the foreseeable
future. If we are unable to expand our direct sales force, we will continue to rely on a commission-based sales force and distributors
to sell Microcyn&reg;. Our existing commission-based sales force and distribution agreements are generally short-term in duration,
and we may need to pursue alternate partners if the other parties to these agreements terminate or elect not to renew their agreements.
If we are unable to retain our current commission-based sales force and distributors for any reason, we must replace them with
alternate salespeople and distributors experienced in supplying the tissue care market, which could be time-consuming and divert
management&rsquo;s attention from other operational matters. In addition, we will need to attract additional distributors to expand
the geographic areas in which we sell Microcyn&reg;. Distributors may not commit the necessary resources to market and sell our
products to the level of our expectations, which could harm our ability to generate revenues. In addition, some of our distributors
may also sell products that compete with ours. In some countries, regulatory licenses must be held by residents of the country.
For example, the regulatory approval for one of our products in India is owned and held by our Indian distributor. If the licenses
are not in our name or under our control, we might not have the power to ensure their ongoing effectiveness and use by us. If current
or future distributors do not perform adequately, or we are unable to locate distributors in particular geographic areas, we may
not realize long-term revenue growth in certain markets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>If we fail to comply with ongoing regulatory
requirements, or if we experience unanticipated problems with our products, these products could be subject to restrictions or
withdrawal from the market.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Regulatory approvals or clearances that we
currently have and that we may receive in the future are subject to limitations on the indicated uses for which the products may
be marketed, and any future approvals could contain requirements for potentially costly post-marketing follow-up studies. If the
FDA determines that our promotional materials or activities constitute promotion of an unapproved use or we otherwise fail to comply
with FDA regulations, we may be subject to regulatory enforcement actions, including warning letters, injunctions, seizures, civil
fines or criminal penalties. In addition, the manufacturing, labeling, packaging, adverse event reporting, storing, advertising,
promoting, distributing and record-keeping for approved products are subject to extensive regulation. We are subject to continued
supervision by European regulatory agencies relating to our CE markings and are required to report any serious adverse incidents
to the appropriate authorities. Our manufacturing facilities, processes and specifications are subject to periodic inspection by
the FDA, Mexican and other regulatory authorities and from time to time, we may receive notices of deficiencies from these agencies
as a result of such inspections. Our failure to continue to meet regulatory standards or to remedy any deficiencies could result
in restrictions being imposed on our products or manufacturing processes, fines, suspension or loss of regulatory approvals or
clearances, product recalls, termination of distribution, product seizures or the need to invest substantial resources to comply
with various existing and new requirements. In the more egregious cases, criminal sanctions, civil penalties, disgorgement of profits
or closure of our manufacturing facilities are possible. The subsequent discovery of previously unknown problems with Microcyn&reg;,
including adverse events of unanticipated severity or frequency, may result in restrictions on the marketing of our products, and
could include voluntary or mandatory recall or withdrawal of products from the market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">New government regulations may be enacted and
changes in FDA policies and regulations and, their interpretation and enforcement, could prevent or delay regulatory approval of
our products. We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation
or administrative action, either in the United States or abroad. Therefore, we do not know whether we will be able to continue
to comply with any regulations or that the costs of such compliance will not have a material adverse effect on our future business,
financial condition, and results of operations. If we are not able to maintain regulatory compliance, we will not be permitted
to market our products and our business would suffer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>


<!-- Field: Page; Sequence: 11; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->9<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We may experience difficulties in manufacturing
Microcyn</I></B>&reg;<B><I>, which could prevent us from commercializing one or more of our products.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The machines used to manufacture our Microcyn&reg;-based
products are complex, use complicated software and must be monitored by highly trained engineers. Slight deviations anywhere in
our manufacturing process, including quality control, labeling and packaging, could lead to a failure to meet the specifications
required by the FDA, the Environmental Protection Agency, European notified bodies, Mexican regulatory agencies and other foreign
regulatory bodies, which may result in lot failures or product recalls. If we are unable to obtain quality internal and external
components, mechanical and electrical parts, if our software contains defects or is corrupted, or if we are unable to attract and
retain qualified technicians to manufacture our products, our manufacturing output of Microcyn&reg;, or any other product candidate
based on our platform that we may develop, could fail to meet required standards, our regulatory approvals could be delayed, denied
or revoked, and commercialization of one or more of our Microcyn&reg;-based products may be delayed or foregone. Manufacturing
processes that are used to produce the smaller quantities of Microcyn&reg; needed for clinical tests and current commercial sales
may not be successfully scaled up to allow production of significant commercial quantities. Any failure to manufacture our products
to required standards on a commercial scale could result in reduced revenues, delays in generating revenue and increased costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Our competitive position depends on our
ability to protect our intellectual property and our proprietary technologies.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our ability to compete and to achieve and maintain
profitability depends on our ability to protect our intellectual property and proprietary technologies. We currently rely on a
combination of patents, patent applications, trademarks, trade secret laws, confidentiality agreements, license agreements and
invention assignment agreements to protect our intellectual property rights. We also rely upon unpatented know-how and continuing
technological innovation to develop and maintain our competitive position. These measures may not be adequate to safeguard our
Microcyn&reg; Technology. If we do not protect our rights adequately, third parties could use our technology, and our ability to
compete in the market would be reduced.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We also have agreed to certain prohibitions
on our intellectual property. Pursuant to the License and Supply Agreement we entered into with Pulmatrix, Inc., we agreed to exclusively
license certain of our proprietary technology to Pulmatrix (formerly, Ruthigen, Inc.) to enable Pulmatrix&rsquo; research and development
and commercialization of RUT58-60, and any improvements to it, in the United States, Canada, European Union and Japan for certain
invasive procedures in human treatment as defined in the License and Supply Agreement. Under the terms of the agreement, we are
also prohibited from using the licensed proprietary technology to sell products that compete with Pulmatrix&rsquo; products within
the defined territory.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Although we have filed several U.S.&nbsp;and
foreign patent applications related to our Microcyn&reg;-based products, the manufacturing technology for making the products,
and their uses, only 10 U.S.&nbsp;patents have been issued from these applications to date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our pending patent applications and any patent
applications we may file in the future may not result in issued patents, and we do not know whether any of our in-licensed patents
or any additional patents that might ultimately be issued by the U.S.&nbsp;Patent and Trademark Office or foreign regulatory body
will protect our Microcyn&reg; Technology. Any claims that are issued may not be sufficiently broad to prevent third parties from
producing competing substitutes and may be infringed, designed around, or invalidated by third parties. Even issued patents may
later be found to be invalid, or may be modified or revoked in proceedings instituted by third parties before various patent offices
or in courts. For example, our European patent that was initially issued on May 30, 2007 was revoked by the Opposition Division
of the European Patent Office in December 2009 following opposition proceedings instituted by a competitor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The degree of future protection for our proprietary
rights is more uncertain in part because legal means afford only limited protection and may not adequately protect our rights,
and we will not be able to ensure that:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">we were the first to invent the inventions described in patent applications;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">we were the first to file patent applications for inventions;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">others will not independently develop similar or alternative technologies or duplicate our products without infringing our intellectual property rights;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 40.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 40.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 40.5pt">&nbsp;</P>


<!-- Field: Page; Sequence: 12; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">any patents licensed or issued to us will provide us with any competitive advantages;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">we will develop proprietary technologies that are patentable; or</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">the patents of others will not have an adverse effect on our ability to do business.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The policies we use to protect our trade secrets
may not be effective in preventing misappropriation of our trade secrets by others. In addition, confidentiality and invention
assignment agreements executed by our employees, consultants and advisors may not be enforceable or may not provide meaningful
protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We operate in the State of California. The
laws of California prevent us from imposing a delay before an employee who may have access to trade secret and propriety know-how
can commence employment with a competing company. Although we may be able to pursue legal action against competitive companies
improperly using our proprietary information, we may not be aware of any use of our trade secrets and proprietary know-how until
after significant damages has been done to our Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We cannot be certain that the steps we have
taken will prevent the misappropriation and use of our intellectual property in the United States, or in foreign countries where
the laws may not protect our proprietary rights as fully as in the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We may face intellectual property infringement
claims that could be time-consuming, costly to defend and could result in our loss of significant rights and, in the case of patent
infringement claims, the assessment of treble damages.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On occasion, we may receive notices of claims
of infringement, misappropriation or misuse of other parties&rsquo; proprietary rights. We may have disputes regarding intellectual
property rights with the parties that have licensed those rights to us. We may also initiate claims to defend our intellectual
property. Intellectual property litigation, regardless of its outcome, is expensive and time-consuming, and could divert management&rsquo;s
attention from our business and have a material negative effect on our business, operating results or financial condition. In addition,
the outcome of such litigation may be unpredictable. If there is a successful claim of infringement against us, we may be required
to pay substantial damages, including treble damages if we were to be found to have willfully infringed a third party&rsquo;s patent,
to the party claiming infringement, develop non-infringing technology, stop selling our products or using technology that contains
the allegedly infringing intellectual property or enter into royalty or license agreements that may not be available on acceptable
or commercially practical terms, if at all. Our failure to develop non-infringing technologies or license the proprietary rights
on a timely basis could harm our business. In addition, modifying our products to exclude infringing technologies could require
us to seek re-approval or clearance from various regulatory bodies for our products, which would be costly and time consuming.
Also, we may be unaware of pending patent applications that relate to our technology. Parties making infringement claims on future
issued patents may be able to obtain an injunction that would prevent us from selling our products or using technology that contains
the allegedly infringing intellectual property, which could harm our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Our ability to generate revenue will
be diminished if we are unable to obtain acceptable prices or an adequate level of reimbursement from third-party payors of health
care costs.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The continuing efforts of governmental and
other third-party payors, including managed care organizations such as health maintenance organizations, or HMOs, to contain or
reduce costs of health care may affect our future revenue and profitability, and the future revenue and profitability of our potential
customers, suppliers and collaborative or license partners and the availability of capital. For example, in certain foreign markets,
pricing or profitability of prescription pharmaceuticals is subject to government control. In the United States, governmental and
private payors have limited the growth of health care costs through price regulation or controls, competitive pricing programs
and drug rebate programs. Our ability to commercialize our products successfully will depend in part on the extent to which appropriate
coverage and reimbursement levels for the cost of our Microcyn&reg; products and related treatment are obtained from governmental
authorities, private health insurers and other organizations, such as HMOs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">There is significant uncertainty concerning
third-party coverage and reimbursement of newly approved medical products and drugs. Third-party payors are increasingly challenging
the prices charged for medical products and services. Also, the trend toward managed healthcare in the United States and the concurrent
growth of organizations such as HMOs, as well as the recently enacted &ldquo;Affordable Care Act,&rdquo; may result in lower prices
for or rejection of our products. The cost containment measures that health care payors and providers are instituting and the effect
of any healthcare reform could materially and adversely affect our ability to generate revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 13; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->11<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In both the United States and some foreign
jurisdictions, there have been a number of legislative and regulatory proposals to change the health care system in ways that could
affect our ability to sell our products profitably. In the United States, the Medicare Prescription Drug, Improvement, and Modernization
Act of 2003, also called the Medicare Modernization Act, or MMA, changed the way Medicare covers and pays for pharmaceutical products.
The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based
on average sales prices for physician-administered drugs. In addition, this legislation provided authority for limiting the number
of drugs that will be covered in any therapeutic class. As a result of this legislation and the expansion of federal coverage of
drug products, we expect that there will be additional pressure to contain and reduce costs. These cost reduction initiatives and
other provisions of this legislation could decrease the coverage and price that we receive for any approved products and could
seriously harm our business. While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow
Medicare coverage policies and payment limitations in setting their own reimbursement rates, and therefore any reduction in reimbursement
that results from the MMA may result in a similar reduction in payments from private payors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In March 2010, the Patient Protection and Affordable
Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively, the PPACA, became law
in the United States. The goal of PPACA is to reduce the cost of health care and substantially change the way health care is financed
by both governmental and private insurers. Our business may be adversely impacted if the PPCA is repealed in its entirety or certain
aspects of the PPCA that are beneficial to our business are repealed or changed as a result of recent political changes. Because
of the continued uncertainty about the implementation of the PPACA, including the potential for further legal challenges or repeal
of that legislation, we cannot quantify or predict with any certainty the likely impact of the PPACA or its repeal on our business
model, prospects, financial condition or results of operations. We also anticipate that Congress, state legislatures, and third-party
payors may continue to review and assess alternative healthcare delivery and payment systems and may in the future propose and
adopt legislation or policy changes or implementations effecting additional fundamental changes in the healthcare delivery system.
We cannot assure you as to the ultimate content, timing, or effect of changes, nor is it possible at this time to estimate the
impact of any such potential legislation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: left; margin-bottom: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We expect to experience pricing pressures in
connection with the sale of our Microcyn&reg; products, due to the trend toward managed health care, the increasing influence of
health maintenance organizations and additional legislative proposals. If we fail to successfully secure and maintain reimbursement
coverage for our products or are significantly delayed in doing so, we will have difficulty achieving market acceptance of our
products and our business will be harmed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We could be required to indemnify third
parties for alleged intellectual property infringement, which could cause us to incur significant costs.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Some of our distribution agreements contain
commitments to indemnify our distributors against liability arising from infringement of third party intellectual property such
as patents. We may be required to indemnify our customers for claims made against them or contribute to license fees they are required
to pay. If we are forced to indemnify for claims or to pay license fees, our business and financial condition could be substantially
harmed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>A significant part of our business is
conducted outside of the United States, exposing us to additional risks that may not exist in the United States, which in turn
could cause our business and operating results to suffer.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have material international operations in
Mexico and Europe. During the years ended March 31, 2016 and 2015, approximately 67% and 73% of our total product related revenue
(including product license fees and royalties), respectively, were generated from sales outside of the United States. Our business
is highly regulated for the use, marketing and manufacturing of our Microcyn&reg;-based products both domestically and internationally.
Our international operations are subject to risks, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">local political or economic instability;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">changes in governmental regulation;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">changes in import/export duties;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 2.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">trade restrictions;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 40.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 40.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 40.5pt">&nbsp;</P>


<!-- Field: Page; Sequence: 14; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->12<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">lack of experience in foreign markets;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">difficulties and costs of staffing and managing operations in certain foreign countries;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">work stoppages or other changes in labor conditions;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">difficulties in collecting accounts receivables on a timely basis or at all; and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">adverse tax consequences or overlapping tax structures.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We plan to continue to market and sell our
products internationally to respond to customer requirements and market opportunities. We currently have manufacturing facilities
in Mexico and the United States. Establishing operations in any foreign country or region presents risks such as those described
above as well as risks specific to the particular country or region. In addition, until a payment history is established over time
with customers in a new geographic area or region, the likelihood of collecting receivables generated by such operations could
be less than our expectations. As a result, there is a greater risk that the reserves set with respect to the collection of such
receivables may be inadequate. If our operations in any foreign country are unsuccessful, we could incur significant losses and
we may not achieve profitability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition, changes in policies or laws of
the United States or foreign governments resulting in, among other things, changes in regulations and the approval process, higher
taxation, currency conversion limitations, restrictions on fund transfers or the expropriation of private enterprises, could reduce
the anticipated benefits of our international expansion. If we fail to realize the anticipated revenue growth of our future international
operations, our business and operating results could suffer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Our sales in international markets subject
us to foreign currency exchange and other risks and costs which could harm our business.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A substantial portion of our revenues are derived
from outside the United States; primarily from Mexico and Europe. Revenues from our Latin America business that we sold to Invekra
on October 27, 2016, represented approximately 38% of our total consolidated revenues during fiscal year 2016. We will continue
to supply products at a reduced price from list prices to Invekra and Sanfer pursuant to our contractual obligations for a transition
period of no more than two years while Invekra builds its own manufacturing lines. However, we expect that our future revenues
from Latin America sales will be substantially reduced which may adversely affect our results of operations and financial condition.
We anticipate that revenues from international customers will continue to represent a substantial portion of our revenues for the
foreseeable future. Because we generate revenues in foreign currencies, we are subject to the effects of exchange rate fluctuations.
The functional currency of our Mexican subsidiary is the Mexican Peso and the functional currency of our Netherlands subsidiary
is the Euro. For the preparation of our consolidated financial statements, the financial results of our foreign subsidiaries are
translated into U.S.&nbsp;dollars using average exchange rates during the applicable period. If the U.S.&nbsp;dollar appreciates
against the Mexican Peso or the Euro, as applicable, the revenues we recognize from sales by our subsidiaries will be adversely
impacted. Foreign exchange gains or losses as a result of exchange rate fluctuations in any given period could harm our operating
results and negatively impact our revenues. Additionally, if the effective price of our products were to increase as a result of
fluctuations in foreign currency exchange rates, demand for our products could decline and adversely affect our results of operations
and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We rely on a number of key customers
who may not consistently purchase our products in the future and if we lose any one of these customers, our revenues may decline.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Although we have a significant number of customers
in each of the geographic markets that we operate in, we rely on certain key customers for a significant portion of our revenues.
We rely on certain key customers for a significant portion of our revenues. At March 31, 2016, one customer represented 40%, one
customer represented 15%, one customer represented 14% and two customers each represented 12% of net revenues. For the nine months
ended December 31, 2016, one customer represented 27% of net revenue. For the nine months ended December 31, 2015, one customer
represented 35% of net revenue. In the future, a small number of customers may continue to represent a significant portion of our
total revenues in any given period. These customers may not consistently purchase our products at a particular rate over any subsequent
period. The loss of any of these customers could adversely affect our revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 15; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->13<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Negative economic conditions increase
the risk that we could suffer unrecoverable losses on our customers&rsquo; accounts receivable which would adversely affect our
financial results.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We grant credit to our business customers,
which are primarily located in Mexico, Europe and the United States. Collateral is generally not required for trade receivables.
We maintain allowances for potential credit losses. At March 31, 2016, one customer represented 33% of the net accounts receivable
balance. At March 31, 2015, one customer represented 56%, and one customer represented 14% of the net accounts receivable balance.
At March 31, 2016, one customer represented 33% of the net accounts receivable balance. At December 31, 2016, one customer represented
30%, one customer represented 26%, one customer represented 23%, one customer represented 16% and one customer represented 13%
of the net accounts receivable balance.. While we believe we have a varied customer base and have experienced strong collections
in the past, if current economic conditions disproportionately impact any one of our key customers, including reductions in their
purchasing commitments to us or their ability to pay their obligations, it could have a material adverse effect on our revenues
and liquidity. We have not purchased insurance on our accounts receivable balances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>The loss of key members of our senior
management team, any of our directors, or our highly skilled scientists, technicians and salespeople could adversely affect our
business.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our success depends largely on the skills,
experience and performance of key members of our executive management team, including Jim Schutz, our Chief Executive Officer,
Robert Miller, our Chief Financial Officer, Robert Northey, our Executive Vice President of Research and Development, and Jeffrey
Day, head of our IntraDerm&trade; Pharmaceuticals division. The efforts of these people will be critical to us as we continue to
develop our products and attempt to commercialize products in the tissue and dermatology markets. If we were to lose one or more
of these individuals, we might experience difficulties in competing effectively, developing our technologies and implementing our
business strategies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our research and development programs depend
on our ability to attract and retain highly skilled scientists and technicians. We may not be able to attract or retain qualified
scientists and technicians in the future due to the intense competition for qualified personnel among medical technology businesses,
particularly in the San&nbsp;Francisco Bay Area. We also face competition from universities and public and private research institutions
in recruiting and retaining highly qualified personnel. In addition, our success depends on our ability to attract and retain salespeople
with extensive experience in dermatology or in the markets we seek, and who have close relationships with the medical community,
including physicians and other medical staff. We may have difficulties locating, recruiting or retaining qualified salespeople,
which could cause a delay or decline in the rate of adoption of our products. If we are not able to attract and retain the necessary
personnel to accomplish our business objectives, we may experience constraints that will adversely affect our ability to support
our research, development and sales programs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>The dermatology, tissue and animal healthcare
industries are highly competitive and subject to rapid technological change. If our competitors are better able to develop and
market products that are less expensive or more effective than any products that we may develop, our commercial opportunity will
be reduced or eliminated.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our success depends, in part, upon our ability
to stay at the forefront of technological change and maintain a competitive position. We compete with large healthcare, pharmaceutical
and biotechnology companies, along with smaller or early-stage companies that have collaborative arrangements with larger pharmaceutical
companies, academic institutions, government agencies and other public and private research organizations. Many of our competitors
have significantly greater financial resources and expertise in research and development, manufacturing, pre-clinical testing,
conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Our competitors may:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">develop and patent processes or products earlier than we will;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">develop and commercialize products that are less expensive or more efficient than any products that we may develop;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">obtain regulatory approvals for competing products more rapidly than we will; and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">improve upon existing technological approaches or develop new or different approaches that render our technology or products obsolete or non-competitive.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>


<!-- Field: Page; Sequence: 16; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->14<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a result, we may not be able to successfully
commercialize any future products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>The success of our research and development
efforts may depend on our ability to find suitable collaborators to fully exploit our capabilities. If we are unable to establish
collaborations or if these future collaborations are unsuccessful, our research and development efforts may be unsuccessful, which
could adversely affect our results of operations and financial condition.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">An important element of our business strategy
is to enter into collaborative or license arrangements under which we license our Microcyn&reg; Technology to other parties for
development and commercialization. We expect to seek collaborators for our drug candidates and for a number of our potential products
because of the expense, effort and expertise required to conduct additional clinical trials and further develop those potential
product candidates. Because collaboration arrangements are complex to negotiate, we may not be successful in our attempts to establish
these arrangements. If we need third party assistance in identifying and negotiating one or more acceptable arrangements, it might
be costly. Also, we may not have products that are desirable to other parties, or we may be unwilling to license a potential product
because the party interested in it is a competitor. The terms of any arrangements that we establish may not be favorable to us.
Alternatively, potential collaborators may decide against entering into an agreement with us because of our financial, regulatory
or intellectual property position or for scientific, commercial or other reasons. If we are not able to establish collaborative
agreements, we may not be able to develop and commercialize new products, which would adversely affect our business and our revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In order for any of these collaboration or
license arrangements to be successful, we must first identify potential collaborators or licensees whose capabilities complement
and integrate well with ours. We may rely on these arrangements for not only financial resources, but also for expertise or economies
of scale that we expect to need in the future relating to clinical trials, manufacturing, sales and marketing, and for licenses
to technology rights. However, it is likely that we will not be able to control the amount and timing or resources that our collaborators
or licensees devote to our programs or potential products. If our collaborators or licensees prove difficult to work with, are
less skilled than we originally expected, or do not devote adequate resources to the program, the relationship will not be successful.
If a business combination involving a collaborator or licensee and a third party were to occur, the effect could be to diminish,
terminate or cause delays in development of a potential product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>If we are unable to comply with broad
and complex federal and state fraud and abuse laws, including state and federal anti-kickback laws, we could face substantial penalties
and our products could be excluded from government healthcare programs.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We are subject to various federal and state
laws pertaining to healthcare fraud and abuse, which include, among other things, &ldquo;anti-kickback&rdquo; laws that prohibit
payments to induce the referral of products and services, and &ldquo;false claims&rdquo; statutes that prohibit the fraudulent
billing of federal healthcare programs. Our operations are subject to the Federal Anti-Kickback Statute, a criminal statute that,
subject to certain statutory exceptions, prohibits any person from knowingly and willfully offering, paying, soliciting or receiving
remuneration, directly or indirectly, to induce or reward a person either (i)&nbsp;for referring an individual for the furnishing
of items or services for which payment may be made in whole or in part by a government healthcare program such as Medicare or Medicaid,
or (ii)&nbsp;for purchasing, leasing, ordering or arranging for or recommending the purchasing, leasing or ordering of an item
or service for which payment may be made under a government healthcare program. Because of the breadth of the Federal Anti-Kickback
Statute, the Office of Inspector General of the U.S.&nbsp;Department of Health and Human Services, was authorized to adopt regulations
setting forth additional exceptions to the prohibitions of the statute commonly known as &ldquo;safe harbors.&rdquo; If all of
the elements of an applicable safe harbor are fully satisfied, an arrangement will not be subject to prosecution under the Federal
Anti-Kickback Statute.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition, if there is a change in law, regulation
or administrative or judicial interpretations of these laws, we may have to change our business practices or our existing business
practices could be challenged as unlawful, which could have a negative effect on our business, financial condition and results
of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Healthcare fraud and abuse laws are complex,
and even minor, inadvertent irregularities can potentially give rise to claims that a statute or regulation has been violated.
The frequency of suits to enforce these laws has increased significantly in recent years and has increased the risk that a healthcare
company will have to defend a false claim action, pay fines or be excluded from the Medicare, Medicaid or other federal and state
healthcare programs as a result of an investigation arising out of such action. We cannot assure you that we will not become subject
to such litigation. Any violations of these laws, or any action against us for violation of these laws, even if we successfully
defend against it, could harm our reputation, be costly to defend and divert management&rsquo;s attention from other aspects of
our business. Similarly, if the physicians or other providers or entities with which we do business are found to have violated
abuse laws, they may be subject to sanctions, which could also have a negative impact on us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 17; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->15<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Our inability to raise additional capital
on acceptable terms in the future may cause us to curtail certain operational activities, including regulatory trials, sales and
marketing, and international operations, in order to reduce costs and sustain the business, and such inability would have a material
adverse effect on our business and financial condition.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We expect capital outlays and operating expenditures
to increase over the next several years as we work to expand our sales force, conduct regulatory trials, commercialize our products
and expand our infrastructure. We may need to raise additional capital in order to, among other things:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">fund our clinical trials and preclinical studies;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">sustain commercialization of our current products or new products;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">expand our manufacturing capabilities;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">increase our sales and marketing efforts to drive market adoption and address competitive developments;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">acquire or license technologies;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">finance capital expenditures and our general and administrative expenses; and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">develop new products.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our present and future funding requirements
will depend on many factors, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">the progress and timing of our clinical trials;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">the level of research and development investment required to maintain and improve our technology position;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">our efforts to acquire or license complementary technologies or acquire complementary businesses;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">changes in product development plans needed to address any difficulties in commercialization;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">competing technological and market developments;&nbsp;and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">changes in regulatory policies or laws that affect our operations.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">If we raise additional funds by issuing equity
securities, dilution to our stockholders will result. Any equity securities issued also may provide for rights, preferences or
privileges senior to those of holders of our common stock. If we raise additional funds by issuing debt securities, these debt
securities would have rights, preferences and privileges senior to those of holders of our common stock, and the terms of the debt
securities issued could impose significant restrictions on our operations. If we raise additional funds through collaborations
or licensing arrangements, we might be required to relinquish significant rights to our technologies or products, or grant licenses
on terms that are not favorable to us. A failure to obtain adequate funds may cause us to curtail certain operational activities,
including regulatory trials, sales and marketing, and international operations, in order to reduce costs and sustain our business,
and would have a material adverse effect on our business and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Our efforts to discover and develop potential
products may not lead to the discovery, development, commercialization or marketing of actual drug products.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We are currently engaged in a number of different
approaches to discover and develop new product applications and product candidates. Discovery and development of potential drug
candidates are expensive and time-consuming, and we do not know if our efforts will lead to discovery of any drug candidates that
can be successfully developed and marketed. If our efforts do not lead to the discovery of a suitable drug candidate, we may be
unable to grow our clinical pipeline or we may be unable to enter into agreements with collaborators who are willing to develop
our drug candidates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 18; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We may not be able to maintain sufficient
product liability insurance to cover claims against us.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Product liability insurance for the healthcare
industry is generally expensive to the extent it is available at all. We may not be able to maintain such insurance on acceptable
terms or be able to secure increased coverage if the commercialization of our products progresses, nor can we be sure that existing
or future claims against us will be covered by our product liability insurance. Moreover, the existing coverage of our insurance
policy or any rights of indemnification and contribution that we may have may not be sufficient to offset existing or future claims.
A successful claim against us with respect to uninsured liabilities or in excess of insurance coverage and not subject to any indemnification
or contribution could have a material adverse effect on our future business, financial condition, and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B><I>If any of our
third-party contractors fail to perform their responsibilities to comply with FDA rules and regulations, the manufacture, marketing
and sales of our products could be delayed, which could decrease our revenues.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Supplying the market
with our Microcyn&reg; Technology products requires us to manage relationships with an increasing number of collaborative partners,
suppliers and third-party contractors. As a result, our success depends partially on the success of these third parties in performing
their responsibilities to comply with FDA rules and regulations. Although we pre-qualify our contractors and we believe that they
are fully capable of performing their contractual obligations, we cannot directly control the adequacy and timeliness of the resources
and expertise that they apply to these activities. For example, we and our suppliers are required to comply with the FDA&rsquo;s
quality system regulations, which cover the methods and documentation of the design, testing, production, control, quality assurance,
labeling, packaging, storage and shipping of our products. The FDA enforces the quality system regulation through inspections.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">If any of our partners
or contractors fail to perform their obligations in an adequate and timely manner, or fail to comply with the FDA&rsquo;s rules
and regulations, including failure to comply with quality systems regulations or a corrective action submitted to the FDA after
notification by the FDA of a deficiency is deemed insufficient, then the manufacture, marketing and sales of our products could
be delayed. Our products could be detained or seized, the FDA could order a recall, or require our partner to replace or offer
refunds for our products. The FDA could also require our partner, and, depending on our agreement with our partner, us, to notify
health professionals and others that the products present unreasonable risks of substantial harm to the public health. If any of
these events occur, the manufacture, marketing and sales of our products could be delayed which could decrease our revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B><I>If we fail to
comply with the FDA&rsquo;s rules and regulations and are subject to an FDA recall as part of an FDA enforcement action, the associated
costs could have a material adverse effect on our business, financial position, results of operations and cash flows.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Our Company, our products,
the manufacturing facilities for our products, the distribution of our products, and our promotion and marketing materials are
subject to strict and continual review and periodic inspection by the FDA and other regulatory agencies for compliance with pre-approval
and post-approval regulatory requirements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">If we fail to comply
with the FDA&rsquo;s rules and regulations, we could be subject to an enforcement action by the FDA. The FDA could undertake regulatory
actions, including seeking a consent decree, recalling or seizing our products, ordering a total or partial shutdown of production,
delaying future marketing clearances or approvals, and withdrawing or suspending certain of our current products from the market.
A product recall, restriction, or withdrawal could result in substantial and unexpected expenditures, destruction of product inventory,
and lost revenues due to the unavailability of one or more of our products for a period of time, which could reduce profitability
and cash flow. In addition, a product recall or withdrawal could divert significant management attention and financial resources.
If any of our products are subject to an FDA recall, we could incur significant costs and suffer economic losses. Production of
our products could be suspended and we could be required to establish inventory reserves to cover estimated inventory losses for
all work-in-process and finished goods related to products we, or our third-party contractors, manufacture. A recall of a material
amount of our products could have a significant, unfavorable impact on our future gross margins.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;<B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B><I>&nbsp;</I></B></P>


<!-- Field: Page; Sequence: 19; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->17<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B><I>If our products
fail to comply with FDA and other governmental regulations, or our products are deemed defective, we may be required to recall
our products and we could suffer adverse public relations that could adversely impact our sales, operating results, and reputation
which would adversely affect our business operations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">We may be exposed
to product recalls, including voluntary recalls or withdrawals, and adverse public relations if our products are alleged to cause
injury or illness, or if we are alleged to have mislabeled or misbranded our products or otherwise violated governmental regulations.
Governmental authorities can also require product recalls or impose restrictions for product design, manufacturing, labeling, clearance,
or other issues. For the same reasons, we may also voluntarily elect to recall, restrict the use of a product or withdraw products
that we consider below our standards, whether for quality, packaging, appearance or otherwise, in order to protect our brand reputation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Product recalls, product
liability claims, even if unmerited or unsuccessful, or any other events that cause consumers to no longer associate our brand
with high quality and safe products may also result in adverse publicity, hurt the value of our brand, harm our reputation among
our customers and other healthcare professionals who use or recommend the products, lead to a decline in consumer confidence in
and demand for our products, and lead to increased scrutiny by federal and state regulatory agencies of our operations, any of
which could have a material adverse effect on our brand, business, performance, prospects, value, results of operations and financial
condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Risks Related to Our Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>The market price of our common stock
may be volatile, and the value of your investment could decline significantly.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The trading price for our common stock has
been, and we expect it to continue to be, volatile. The price at which our common stock trades depends upon a number of factors,
including our historical and anticipated operating results, our financial situation, announcements of new products by us or our
competitors, our ability or inability to raise the additional capital we may need and the terms on which we raise it, and general
market and economic conditions. Some of these factors are beyond our control. Broad market fluctuations may lower the market price
of our common stock and affect the volume of trading in our stock, regardless of our financial condition, results of operations,
business or prospects. It is impossible to assure you that the market price of our shares of common stock will not fall in the
future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Our operating results may fluctuate,
which could cause our stock price to decrease.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Fluctuations in our operating results may lead
to fluctuations, including declines, in our share price. Our operating results and our share price may fluctuate from period to
period due to a variety of factors, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">demand by physicians, other medical staff and patients for our Microcyn&reg;-based products;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">reimbursement decisions by third-party payors and announcements of those decisions;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">clinical trial results published by others in our industry and publication of results in peer-reviewed journals or the presentation at medical conferences;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">the inclusion or exclusion of our Microcyn&reg;-based products in large clinical trials conducted by others;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 40.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">actual and anticipated fluctuations in our quarterly financial and operating results;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">developments or disputes concerning our intellectual property or other proprietary rights;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">issues in manufacturing our product candidates or products;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>


<!-- Field: Page; Sequence: 20; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">new or less expensive products and services or new technology introduced or offered by our competitors or by us;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">the development and commercialization of product enhancements;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">changes in the regulatory environment;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 2.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">delays in establishing our sales force or new strategic relationships;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">costs associated with collaborations and new product candidates;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">introduction of technological innovations or new commercial products by us or our competitors;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">litigation or public concern about the safety of our product candidates or products;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">changes in recommendations of securities analysts or lack of analyst coverage;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">failure to meet analyst expectations regarding our operating results;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">additions or departures of key personnel; and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">general market conditions.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Variations in the timing of our future revenues
and expenses could also cause significant fluctuations in our operating results from period to period and may result in unanticipated
earning shortfalls or losses. In addition, The NASDAQ Capital Market, in general, and the market for life sciences companies, in
particular, have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the
operating performance of those companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Anti-takeover provisions in our certificate
of incorporation and bylaws and under Delaware law may make it more difficult for stockholders to change our management and may
also make a takeover difficult.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our corporate documents and Delaware law contain
provisions that limit the ability of stockholders to change our management and may also enable our management to resist a takeover.
These provisions include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">the ability of our Board of Directors to issue and designate, without stockholder approval, the rights of up to 714,286 shares of convertible preferred stock, which rights could be senior to those of common stock;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 40.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">limitations on persons authorized to call a special meeting of stockholders; and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">advance notice procedures required for stockholders to make nominations of candidates for election as directors or to bring matters before meetings of stockholders.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We are subject to Section 203 of the Delaware
General Corporation Law, which, subject to certain exceptions, prohibits &ldquo;business combinations&rdquo; between a publicly-held
Delaware corporation and an &ldquo;interested stockholder,&rdquo; which is generally defined as a stockholder who became a beneficial
owner of 15% or more of a Delaware corporation&rsquo;s voting stock for a three-year period following the date that such stockholder
became an interested stockholder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">These provisions might discourage, delay or
prevent a change of control in our management. These provisions could also discourage proxy contests and make it more difficult
for you and other stockholders to elect directors and cause us to take other corporate actions. In addition, the existence of these
provisions, together with Delaware law, might hinder or delay an attempted takeover other than through negotiations with our Board
of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 21; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We currently have significant &ldquo;equity
overhang&rdquo; which could adversely affect the market price of our common stock and impair our ability to raise additional capital
through the sale of equity securities in the future.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">We currently have
significant &ldquo;equity overhang.&rdquo; The possibility that substantial amounts of our common stock may be issued to and then
sold by investors, or the perception that such issuances and sales could occur, often called &ldquo;equity overhang,&rdquo; could
adversely affect the market price of our common stock and could impair our ability to raise additional capital through the sale
of equity securities in the future. The consummation of the exercise of warrants for common stock would significantly increase
the number of issued and outstanding shares of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Our stockholders may experience substantial
dilution in the value of their investment if we issue additional shares of our capital stock or other securities convertible into
common stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our Restated Certificate of Incorporation,
as amended, allows us to issue up to 12,000,000 shares of our common stock and to issue and designate, without stockholder approval,
the rights of up to 714,286 shares of preferred stock. In the event we issue additional shares of our capital stock, dilution to
our stockholders could result. In addition, if we issue and designate a class of convertible preferred stock, these securities
may provide for rights, preferences or privileges senior to those of holders of our common stock. Additionally, if we issue preferred
stock, it may convert into common stock at a ratio of 1:1 or greater because our Restated Certificate of Incorporation, as amended,
allows us to designate a conversion ratio without limitations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Shares issuable upon the conversion of
warrants or the exercise of outstanding options may substantially increase the number of shares available for sale in the public
market and depress the price of our common stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2016, we had outstanding
warrants exercisable for an aggregate of 1,365,000 shares of our common stock at a weighted average exercise price of approximately
$7.27 per share. In addition, as of December 31, 2016, options to purchase an aggregate of 851,000 shares of our common stock were
outstanding at a weighted average exercise price of approximately $18.63 per share and a weighted average contractual term of 7.54
years. In addition, 1,265,000 shares of our common stock were available on December 31, 2016 for future option grants under our
Amended and Restated 2006 Stock Incentive Plan, our 2011 Stock Incentive Plan, and our 2016 Equity Incentive plan. To the extent
any of these warrants or options are exercised and any additional options are granted and exercised, there will be further dilution
to stockholders and investors. Until the options and warrants expire, these holders will have an opportunity to profit from any
increase in the market price of our common stock without assuming the risks of ownership. Holders of options and warrants may convert
or exercise these securities at a time when we could obtain additional capital on terms more favorable than those provided by the
options or warrants. The exercise of the options and warrants will dilute the voting interest of the owners of presently outstanding
shares by adding a substantial number of additional shares of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have filed several registration statements
with the SEC, so that substantially all of the shares of our common stock which are issuable upon the exercise of outstanding warrants
and options may be sold in the public market. The sale of our common stock issued or issuable upon the exercise of the warrants
and options described above, or the perception that such sales could occur, may adversely affect the market price of our common
stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="a_001"></A><B>CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This prospectus contains forward looking
statements. When used in this prospectus, the words &ldquo;anticipate,&rdquo; &ldquo;intend,&rdquo; &ldquo;estimate,&rdquo; &ldquo;plan,&rdquo;
&ldquo;project,&rdquo; &ldquo;continue,&rdquo; &ldquo;ongoing,&rdquo; &ldquo;potential,&rdquo; &ldquo;expect,&rdquo; &ldquo;predict,&rdquo;
&ldquo;believe,&rdquo; &ldquo;intend,&rdquo; &ldquo;may,&rdquo; &ldquo;can,&rdquo; &ldquo;will,&rdquo; &ldquo;should,&rdquo; &ldquo;could,&rdquo;
&ldquo;would,&rdquo; &ldquo;proposal,&rdquo; and similar expressions are intended to identify forward-looking statements. You should
not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated
in the forward-looking statements for many reasons, including the reasons described in our &ldquo;Risk Factors&rdquo; section.
Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as
of the date on which the statements are made. These forward-looking statements speak only as of the date of this prospectus. We
expressly disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect
any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement
is based, except as required by law.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 1.1pt; text-align: center; text-indent: -0.5pt"><B><A NAME="a3"></A>USE OF
PROCEEDS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><FONT STYLE="background-color: white">We
received $5,444,000 in net proceeds from the sale of shares and warrants in this offering after deducting underwriting discounts
and commissions and estimated offering expenses payable by us. If a warrant holder exercises their warrants for cash, we will also
receive proceeds from such exercise at the time of such exercise. We cannot predict when or if the warrants will be exercised.
It is possible that the warrants may expire and may never be exercised, in which case we will not receive any additional proceeds.
We intend to use the net proceeds received from this offering to increase our direct sales force, to develop and launch new products
and for general working capital.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 1.4pt; text-align: center; text-indent: -0.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 1.4pt; text-align: center; text-indent: -0.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 1.4pt; text-align: center; text-indent: -0.5pt"><B>&nbsp;</B></P>


<!-- Field: Page; Sequence: 22; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->20<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><A NAME="a4"></A><B>DILUTION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><FONT STYLE="background-color: white"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><FONT STYLE="background-color: white">Our
net tangible book value as of December 31, 2016 was approximately $22,863,000, or approximately $5.37 per share. Net tangible book
value per share represents our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding
as of December 31, 2016.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; background-color: white"><FONT STYLE="background-color: white">After
giving effect to the exercise of 5,379,425 warrants sold in the offering that remain outstanding at December 31, 2016 which would
have resulted in 1,075,885 shares of common stock being issued at an exercise price of $6.50 per share, our as adjusted net tangible
book value as of December 31, 2016 would have been $29,856,000, or $5.60 per share. This represents an immediate increase in net
tangible book value of $0.23 per share to existing stockholders of our Company and an immediate decrease in the net tangible book
value of $0.90 per share to warrants exercised from this offering, as illustrated in the following table:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom; background-color: #EEEEEE">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Exercise price per warrant</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">6.50</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="width: 87%; text-align: justify"><FONT STYLE="font-size: 10pt">Net tangible book value per share as of December 31, 2016</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">5.37</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #EEEEEE">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Increase in net tangible book value per share attributable to existing stockholders</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">0.23</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Adjusted net tangible book value per share as of December 31, 2016, after giving effect to the exercise of 5,379,425 warrants</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5.60</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #EEEEEE">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Decrease in net tangible book value per share to holders of warrants purchased in this offering</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">0.90</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; background-color: white"><FONT STYLE="background-color: white">The
above discussion and tables do not include the following (as of December 31, 2016): </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 90%"><FONT STYLE="font-size: 10pt; background-color: white">851,000 </FONT><FONT STYLE="font-size: 10pt">shares of common stock issuable upon exercise of outstanding stock options, at a weighted average exercise price of $18.63 per share, under our equity incentive plans;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 90%"><FONT STYLE="font-size: 10pt; background-color: white">1,265,000 additional shares of common stock reserved for future issuance under our equity incentive plans;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 90%"><FONT STYLE="font-size: 10pt; background-color: white">1,365,000 shares of common stock issuable upon exercise of outstanding warrants, with current exercise prices ranging from $5.00 per share to $630.00 per share.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 23; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->21<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><A NAME="a5"></A><B>PRICE RANGE OF OUR
COMMON STOCK</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Market Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Our common stock is
quoted on The NASDAQ Capital Market under the symbol &ldquo;SNOA.&rdquo; and has been trading since our initial public offering
on January&nbsp;25, 2007. The following table sets forth the high and low sales prices for our common stock for each quarter during
the last two fiscal years as reported on Bloomberg. The prices have been adjusted to reflect a 1-for-5 reverse split, effective
June 24, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">High</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Low</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: justify; padding-bottom: 1pt"><U>For the Fiscal Year Ending March 31, 2017</U></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-decoration: none; text-align: justify">Third Quarter ended December 31, 2016</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">5.65</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">3.91</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-decoration: none; text-align: justify">Second Quarter ended September 30, 2016</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.98</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.57</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-decoration: none; text-align: justify">First Quarter ended June&nbsp;30, 2016</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.65</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.62</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-decoration: underline; text-align: justify">For the Fiscal Year Ended March 31, 2016</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-decoration: none; text-align: justify">Fourth Quarter ended March 31, 2016</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7.15</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-decoration: none; text-align: justify">Third Quarter ended December 31, 2015</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.40</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-decoration: none; text-align: justify">Second Quarter ended September 30, 2015</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">9.65</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-decoration: none; text-align: justify">First Quarter ended June&nbsp;30, 2015</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">9.85</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.25</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-decoration: underline; text-align: justify">For the Fiscal Year Ended March 31, 2015</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-decoration: none; text-align: justify">Fourth Quarter ended March 31, 2015</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7.90</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.80</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-decoration: none; text-align: justify">Third Quarter ended December 31, 2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">11.75</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.65</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-decoration: none; text-align: justify">Second Quarter ended September 30, 2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">15.40</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">10.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-decoration: none; text-align: justify">First Quarter ended June&nbsp;30, 2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">21.08</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">14.25</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The warrants from
this offering began trading on The NASDAQ Capital Market on January 21, 2015 under the symbol &ldquo;SNOAW.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Holders</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of March 2, 2017, we had approximately 343
holders of record of our common stock. Holders of record include nominees who may hold shares on behalf of multiple owners.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 2pt; text-align: center; text-indent: -0.5pt"><B><A NAME="a6"></A>DIVIDEND
POLICY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">We have never declared
or paid any cash dividends on our common stock. We currently anticipate that we will retain all future earnings for the operation
of our business and we do not currently intend to pay any cash dividends on our common stock in the foreseeable future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 1.7pt; text-align: center; text-indent: -0.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 1.7pt; text-align: center; text-indent: -0.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 1.7pt; text-align: center; text-indent: -0.5pt"><B>&nbsp;</B></P>


<!-- Field: Page; Sequence: 24; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->22<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"> <B><A NAME="a7"></A>CAPITALIZATION</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in; background-color: white"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; background-color: white">The following
table sets forth our capitalization as of December 31, 2016 on an actual basis and on a pro forma basis, based upon the exercise
of 5,379,425 warrants sold in the offering that remain outstanding at December 31, 2016 which would have resulted in 1,075,885
shares of common stock being issued at an exercise price of $6.50 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Based on the exercise
price of $6.50 per share, we allocated the gross proceeds of $6,993,000 aggregate consideration to common stock. The pro forma
information below is for illustrative purposes and our capitalization following the exercise of all warrants may be adjusted. You
should read this table in conjunction with &ldquo;<I>Use of Proceeds</I>&rdquo; above as well as our &ldquo;<I>Management&rsquo;s
Discussion and Analysis of Financial Condition and Results of Operations</I>&rdquo; and financial statements and the related notes
appearing elsewhere in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>December 31, 2016</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Actual</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Pro Forma (1)</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>(in thousands)</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>(unaudited)</B></P></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #EEEEEE">
    <TD STYLE="width: 74%; text-align: justify; padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Total assets</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">27,507</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">34,500</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify; padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Current portion of long-term debt</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">12</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">12</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #EEEEEE">
    <TD STYLE="text-align: justify; padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Stockholders&rsquo; equity:</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Convertible preferred stock, $0.0001 par value; 714,286 shares authorized, none issued and outstanding actual</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #EEEEEE">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Common stock, $0.0001 par value; 12,000,000 shares authorized, 4,257,754 shares issued and outstanding actual; and 12,000,000 shares authorized, 5,333,639 shares issued and outstanding pro forma (1)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify; padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Additional paid-in capital</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">168,198</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">171,191</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #EEEEEE">
    <TD STYLE="text-align: justify; padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Accumulated deficit</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(140,665</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(140,665</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify; padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Accumulated other comprehensive loss</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(4,671</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(4,671</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #EEEEEE">
    <TD STYLE="text-align: justify; padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Total stockholders&rsquo; equity</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">22,863</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">29,856</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The above discussion
and table does not include the following (as of December 31, 2016):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 90%"><FONT STYLE="font-size: 10pt; background-color: white">851,000 </FONT><FONT STYLE="font-size: 10pt">shares of common stock issuable upon exercise of outstanding stock options, at a weighted average exercise price of $18.63 per share, under our equity incentive plans;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 90%"><FONT STYLE="font-size: 10pt">1,265,000 additional shares of common stock reserved for future issuance under our equity incentive plans;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 90%"><FONT STYLE="font-size: 10pt; background-color: white">1,365,000 </FONT><FONT STYLE="font-size: 10pt">shares of common stock issuable upon exercise of outstanding warrants, with current exercise prices ranging from $5.00 per share to $<FONT STYLE="background-color: white">630.00 </FONT>per share.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 1.4pt; text-align: center; text-indent: -0.5pt"><A NAME="a8"></A><FONT STYLE="text-transform: uppercase"><B>Management&rsquo;s
Discussion and Analysis of Financial Condition and Results of Operations</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Critical Accounting Policies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of our consolidated financial
statements in conformity with accounting principles generally accepted in the United States requires management to exercise its
judgment. We exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and
assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenues and expenses, and disclosure
of commitments and contingencies at the date of the consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On an ongoing basis, we evaluate our estimates
and judgments. Areas in which we exercise significant judgment include, but are not necessarily limited to, our valuation of accounts
receivable, inventory, income taxes, equity transactions (compensatory and financing) and contingencies. We have also adopted certain
polices with respect to our recognition of revenue that we believe are consistent with the guidance provided under Securities and
Exchange Commission Staff Accounting Bulletin&nbsp;No.&nbsp;104.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 25; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->23<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We base our estimates and judgments on a variety
of factors including our historical experience, knowledge of our business and industry, current and expected economic conditions,
the attributes of our products, the regulatory environment, and in certain cases, the results of outside appraisals. We periodically
re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that
modifications are necessary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">While we believe that the factors we evaluate
provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results
will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ
from such estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A description of significant accounting policies
that require us to make estimates and assumptions in the preparation of our consolidated financial statements is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Long-Term Investments</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our long-term investments consisted of the
shares we owned in Ruthigen Inc., now Pulmatrix Inc., at March 31, 2015. We carry securities that do not have a readily determinable
fair value at cost. During the year ended March 31, 2015, we recorded an impairment loss in the amount of $4,650,000 which represents
the difference between cost and the amount we agreed to sell our shares of Ruthigen. During the year ended March 31, 2016, we sold
all our shares in Pulmatrix.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Stock-based Compensation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We account for share-based awards exchanged
for employee services based on the estimated fair value of the award on the grant date. We estimate the fair value of employee
stock awards using the Black-Scholes option pricing model. We amortize the fair value of employee stock options on a straight-line
basis over the requisite service period of the awards.&nbsp; Compensation expense includes the impact of an estimate for forfeitures
for all stock options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We account for equity instruments issued to
non-employees based on the estimated fair value of the instrument on the measurement date. The measurement of stock-based compensation
is subject to periodic adjustment as the underlying equity instrument vests or becomes non-forfeitable. Non-employee stock-based
compensation charges are amortized over the vesting period or as earned.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Revenue Recognition and Accounts Receivable</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We generate revenue from sales of our products
to a customer base including hospitals, medical centers, doctors, pharmacies, distributors and wholesalers. The Company sells products
directly to end users and to distributors. We also entered into agreements to license its technology and products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We also provide regulatory compliance testing
and quality assurance services to medical device and pharmaceutical companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We record revenue when (i)&nbsp;persuasive
evidence of an arrangement exists, (ii)&nbsp;delivery has occurred, (iii)&nbsp;the fee is fixed or determinable, and (iv)&nbsp;collectability
of the sale is reasonably assured.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We require all product sales to be supported
by evidence of a sale transaction that clearly indicates the selling price to the customer, shipping terms and payment terms. Evidence
of an arrangement generally consists of a contract or purchase order approved by the customer. We have ongoing relationships with
certain customers from which we customarily accept orders by telephone in lieu of purchase orders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We recognize revenue at the time we receive
confirmation that the goods were either tendered at their destination, when shipped &ldquo;FOB destination,&rdquo; or transferred
to a shipping agent, when shipped &ldquo;FOB shipping point.&rdquo; Delivery to the customer is deemed to have occurred when the
customer takes title to the product. Generally, title passes to the customer upon shipment, but could occur when the customer receives
the product based on the terms of the agreement with the customer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 26; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->24<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The selling prices of all goods are fixed,
and agreed to with the customer, prior to shipment. Selling prices are generally based on established list prices. The right to
return product is customarily based on the terms of the agreement with the customer. We estimate and accrue for potential returns
and record this as a reduction of revenue in the same period the related revenue is recognized. Additionally, distribution fees
are paid to certain wholesale distributors based on contractually determined rates. We estimate and accrue the fee on shipment
to the respective wholesale distributors and recognize the fee as a reduction of revenue in the same period the related revenue
is recognized. We also offer cash discounts to certain customers, generally 2% of the sales price, as an incentive for prompt payment.
We account for cash discounts by reducing accounts receivable by the prompt pay discount amount and recognize the discount as a
reduction of revenue in the same period the related revenue is recognized. Additionally, we participate in certain rebate programs
which provide discounted prescriptions to qualified patients. We contract with a third-party to administer the program. We estimate
and accrue for future rebates based on historical data for rebate redemption rates and the historical value of redemptions. Rebates
are recognized as a reduction of revenue in the same period the related revenue is recognized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We evaluate the creditworthiness of new customers
and monitors the creditworthiness of its existing customers to determine whether an event or changes in their financial circumstances
would raise doubt as to the collectability of a sale at the time in which a sale is made. Payment terms on sales made in the United
States are generally 30&nbsp;days and are extended up to 90 days for initial product launches, payment terms internationally generally
range from prepaid prior to shipment to 90&nbsp;days.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In the event a sale is made to a customer under
circumstances in which collectability is not reasonably assured, we either require the customer to remit payment prior to shipment
or defer recognition of the revenue until payment is received. We maintain a reserve for amounts which may not be collectible due
to risk of credit losses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Product license revenue is generated through
agreements with strategic partners for the commercialization of Microcyn&reg; products. The terms of the agreements sometimes include
non-refundable upfront fees. We analyze multiple element arrangements to determine whether the elements can be separated. Analysis
is performed at the inception of the arrangement and as each product is delivered. If a product or service is not separable, the
combined deliverables are accounted for as a single unit of accounting and recognized over the performance obligation period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">When appropriate, we defer recognition of non-refundable
upfront fees. If we have continuing performance obligations then such up-front fees are deferred and recognized over the period
of continuing involvement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We recognize royalty revenues from licensed
products upon the sale of the related products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenue from consulting contracts is recognized
as services are provided. Revenue from testing contracts is recognized as tests are completed and a final report is sent to the
customer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Inventory</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories are stated at the lower of cost,
cost being determined on a standard cost basis (which approximates actual cost on a first-in, first-out basis), or market. Due
to changing market conditions, estimated future requirements, age of the inventories on hand and production of new products, we
regularly review inventory quantities on hand and record a provision to write down excess and obsolete inventory to its estimated
market value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Income Taxes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We are required to determine the aggregate
amount of income tax expense or loss based upon tax statutes in jurisdictions in which we conduct business. In making these estimates,
we adjust our results determined in accordance with generally accepted accounting principles for items that are treated differently
by the applicable taxing authorities. Deferred tax assets and liabilities resulting from these differences are reflected on our
balance sheet for temporary differences in loss and credit carryforwards that will reverse in subsequent years. We also establish
a valuation allowance against deferred tax assets when it is more likely than not that some or all of the deferred tax assets will
not be realized. Valuation allowances are based, in part, on predictions that management must make as to our results in future
periods. The outcome of events could differ over time which would require that we make changes in our valuation allowance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>


<!-- Field: Page; Sequence: 27; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Use of Estimates</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the dates of the consolidated
financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ
from these estimates. Significant estimates and assumptions include reserves and write-downs related to receivables and inventories,
the recoverability of long-lived assets, the valuation allowance related to our deferred tax assets, valuation of equity and derivative
instruments, debt discounts, valuation of investments and the estimated amortization periods of upfront product licensing fees
received from customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Financial Assets and Liabilities</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses and other liabilities are carried at cost, which management
believes approximates fair value due to the short-term nature of these instruments. The fair value of capital lease obligations
and equipment loans approximates their carrying amounts as a market rate of interest is attached to their repayment. The Company
measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes
the use of unobservable inputs when measuring fair value. The Company uses three levels of inputs that may be used to measure fair
value:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level&nbsp;1&nbsp;&ndash; quoted prices in
active markets for identical assets or liabilities</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level&nbsp;2&nbsp;&ndash; quoted prices for
similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active;
and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level&nbsp;3&nbsp;&ndash; inputs that are unobservable
(for example cash flow modeling inputs based on assumptions)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 3 liabilities are valued using unobservable
inputs to the valuation methodology that are significant to the measurement of the fair value of the liabilities. For fair value
measurements categorized within Level 3 of the fair value hierarchy, the Company&rsquo;s accounting and finance department, who
report to the Chief Financial Officer, determine its valuation policies and procedures. The development and determination of the
unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company&rsquo;s
accounting and finance department and are approved by the Chief Financial Officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2016 and March 31, 2016,
there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Recent Accounting Pronouncements</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2016, the FASB issued ASU 2016-01&nbsp;Financial
Instruments-Overall, which address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.
The amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within
those fiscal years.&nbsp;Earlier application is permitted under specific circumstances. The Company is currently assessing the
potential impact of this standard on its financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flows (Topic 230). This amendment will provide guidance on the presentation and classification of specific cash
flow items to improve consistency within the statement of cash flows. ASU 2016-15 is effective for fiscal years, and interim periods
within those fiscal years beginning after December 15, 2017, with early adoption permitted. The Company is evaluating the effect
that ASU 2016-15 will have on its financial statements and related disclosures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>


<!-- Field: Page; Sequence: 28; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->26<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash (&ldquo;ASU 2016-18&rdquo;) that changes the presentation of restricted cash
and cash equivalents on the statement of cash flows. Restricted cash and restricted cash equivalents will be included with cash
and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.
This ASU is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within
those fiscal years, but early adoption is permissible. The Company is currently evaluating the potential impact that ASU 2016-18
may have on its financial position and statement of cash flows.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounting standards that have been issued
or proposed by the Financial Accounting Standards Board (&ldquo;FASB&rdquo;), SEC and/or other standards-setting bodies that do
not require adoption until a future date are not expected to have a material impact on the condensed consolidated financial statements
upon adoption.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Results of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Comparison of the Years Ended March 31,
2016 and 2015</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Revenues</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Total revenues for the year ended March 31,
2016 of $15,084,000 increased by $1,230,000 or 9%, as compared to $13,854,000 for the year ended March 31, 2015. Product revenues
for the year ended March 31, 2016 of $13,042,000 increased by $3,103,000 or 31% when compared to the same period in fiscal 2015.
This increase was the result of strong growth in the United States and Rest of World, partially offset by a slight decline in Latin
America due to the decline in the peso. Product licensing fees and royalties of $981,000 decreased $2,075,000, largely related
to the termination of our contract with our former partner Innovacyn and a reduction of amortization of upfront payments from Laboratorios
Sanfer, S.A. de C.V.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Product revenues in the United States for the
year ended March 31, 2016 of $4,371,000, increased by $2,393,000, or 121%, when compared to the same period in the prior year.
This increase was mostly the result of higher sales of our dermatology products. We currently have a direct sales force team of
19 focused on dermatology and through March 31, 2016, we have launched six new dermatology products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Product revenue in Europe and the Rest of the
World for the year ended March 31, 2016 of $3,706,000, increased by $798,000, or 27%, as compared to the same period in the prior
year, with the largest increases in Asia, partially offset by a slight decline in the Middle East. The revenue in Europe for the
year ended March 31, 2016, increased 21% in Euro and 6% in U.S. dollars, when compared to the same period last year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Product revenue in Latin America for the year
ended March 31, 2016 was $4,965,000, down $88,000 or 2%, when compared to the same period in the prior year. This decrease was
caused by a 19% decline in the peso from the same period in the prior year. The sales growth in local currency, when compared to
the prior year, was 17%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows our product revenues
by geographic region:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Year Ended March 31,</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2016</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2015</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>$ Change</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>% Change</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 48%"><FONT STYLE="font-size: 10pt">United States</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">4,371,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">1,978,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">2,393,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">121%</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Latin America</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">4,965,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5,053,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(88,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(-2%</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font-size: 10pt">Europe and Rest of the World</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">3,706,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2,908,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">798,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">27%</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">13,042,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">9,939,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,103,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">31%</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font-size: 10pt">Product license fees and royalties</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">981,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">3,056,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(2,075,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(68%</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Total</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">14,023,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">12,995,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">1,028,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">8%</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In the year ended March 31, 2016, product license
fees and royalties revenue declined primarily as a result of the termination of our agreement with our former partner Innovacyn,
and a decrease in the amortization of upfront payments from Laboratorios Sanfer, S.A. de C.V.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 29; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->27<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows our product license
fees and royalties revenue by partner:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Year Ended March 31,</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt"><B>Product license fees and royalties</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2016</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2015</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>$ Change</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>% Change</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 48%"><FONT STYLE="font-size: 10pt">Exeltis (formerly Quinnova)</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">201,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">437,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">(236,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">(54%</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Innovacyn</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">29,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,120,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(1,091,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(97%</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font-size: 10pt">Laboratorios Sanfer (formerly More Pharma)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">751,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,499,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(748,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(50%</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Total product license fees and royalties</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">981,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">3,056,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(2,075,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(68%</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Service revenues for the year ended March 31,
2016 of $1,061,000 increased by $202,000 when compared to $859,000 in the prior period. This increase was due to an increase in
the number of tests and services provided by our lab services business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Gross Profit</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the year ended March 31, 2016, we reported
gross profit of $7,210,000 or 48% of revenues, compared to a gross profit of $7,288,000, or 53% of revenues, for the same period
in the prior year. The decline in gross profit was primarily due to the decline in our license fees and royalties revenue of $2,075,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the year ended March 31, 2016, we reported
product gross profit of $6,049,000, or 46%, compared to product gross profit of $4,031,000, or 41%, for the same period in the
prior year. The increase in product gross profit was primarily related to improved margins in the United States as a result of
the launch of higher margin dermatology products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the year ended March 31, 2016, we reported
service gross profit of $180,000, or 17%, compared to service gross profit of $201,000, or 23%, for the same period in the prior
year. The decline in service gross profit was primarily related to the mix of tests and services performed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Research and Development Expense</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We reported research and development expense
of $1,806,000 for the year ended March 31, 2016, an increase of $273,000, or 18%, when compared to the same period in the prior
year. The increase is largely due to higher costs related to clinical studies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Selling, General and Administrative Expense</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We reported selling, general and administrative
expenses of $15,556,000 for the year ended March 31, 2016, an increase of $3,142,000, or 25%, when compared to the same period
in the prior year. The increase for the year ended March 31, 2016 was primarily due to higher sales and marketing expenses of $2,212,000
primarily related to the addition of our direct dermatology sales force in the United States, higher costs related to the launch
of new dermatology products and higher stock compensation charges of $505,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We expect selling, general and administrative
expenses to increase as we add people to our direct sales force.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Gain due to Change in Fair Value of Derivative
Liabilities</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with our December 9, 2013 and
February 26, 2014 registered direct offerings we issued a series of common stock purchase warrants, which contain cash settlement
provisions. During the year ended March 31, 2016, we recorded a decrease in the fair value of our derivative liabilities of $11,000,
primarily due to a decrease in our common stock price and the decreasing contractual term of the warrants. During the year ended
March 31, 2015, we recorded a decrease in the fair value of our derivative liabilities of $3,164,000, primarily due to a decrease
in our common stock price and the decreasing contractual term of the warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Other Expense, Net</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Other expense, net of $20,000 for the year
ended March 31, 2016, decreased $36,000, from $56,000 for the same period in the prior year. The decrease in other expense, net
for the year ended March 31, 2016 was primarily related to foreign exchange gains and losses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>


<!-- Field: Page; Sequence: 30; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->28<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Net Loss</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net loss for the year ended March 31, 2016
was $10,162,000 compared to $8,203,000, for the same period in the prior year. The increase in net loss is primarily due to an
increase of $3,415,000 in our operating expenses mostly related to our dermatology division and $570,000 of additional stock compensation
expenses in the current period. Additionally, for the year ended March 31, 2016 our product licensing and royalties&rsquo; revenues
decreased $2,075,000 due to a combined decrease in amortization of upfront fees related to Laboratorios Sanfer and the loss of
our animal health partner Innovacyn. This was offset by an increase in our product related gross profit of $2,018,000. During the
year ended March 31, 2015, we recorded an impairment loss in the amount of $4,650,000 related to our investment in Ruthigen, offset
by $3,164,000 gain due to a change in fair value of our derivative liabilities. These transactions did not recur during the year
ended March 31, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Comparison of the Three Months Ended December
31, 2016 and 2015</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Results of Continuing Operations</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Revenues</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Total revenues for the three months ended December
31, 2016 of $3,361,000 increased by $878,000 or 35%, as compared to $2,483,000 for the three months ended December 31, 2015. Product
revenues for the three months ended December 31, 2016 of $3,174,000 increased by $962,000 or 43% when compared to the same period
in the prior year. This increase was the result of strong growth in the United States, offset by a decline in Europe and the Rest
of the World. Product licensing fees and royalties decreased $44,000, related to the loss of our former partner, Exeltis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Product revenues in the United States for the
three months ended December 31, 2016 of $1,671,000, increased by $661,000, or 65%, when compared to the same period in the prior
year. This increase was mostly the result of higher sales of our dermatology and animal health products. We currently have a direct
sales force team of 28 sales people focused on selling our dermatology product portfolio of eight products, for the treatment of
atopic dermatitis, scar management, surgical procedures, an oral anti-infective for severe acne, and Ceramax&trade;, which utilizes
a &ldquo;state of the art&rdquo; skin repair technology. In addition, sales to a new animal health care partner increased during
the period compared to the prior year. Going forward, while we expect sales of both our U.S. dermatology and animal health product
lines will continue to grow, we expect sales of our dermatology product lines to grow faster and thus, the percentage of animal
sales as a part of our overall sales decrease. Management has determined that our core focus will continue to be prescription dermatology
sales. We believe focusing on higher margin dermatology products and utilizing an internal sales force, allows us to better control
and grow our future results rather than relying on external partners for marketing and sales.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Product revenue in Europe and the Rest of the
World for the three months ended December 31, 2016 of $1,038,000, decreased by $164,000, or 14%, as compared to the same period
in the prior year, with decreases in Europe, Middle East and India, partially offset by increases in Asia.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a result of the asset purchase agreement
and arrangement we entered into on October 27, 2016 with Invekra, we expect our revenues in Latin America will decrease significantly.
Pursuant to the arrangement, going forward we will receive a royalty of 3% on all Latin American net revenues (outside of Mexico),
with a minimum payment of $250,000 per year for the next ten years, to be paid quarterly in Mexican pesos. Additionally, while
Invekra sets up their manufacturing capabilities, we will continue to supply Invekra with product at a reduced price. During the
three months ended December 31, 2016, we reported $465,000 of Latin America product revenue related to Invekra.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 31; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->29<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows our product revenues
by geographic region:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 11.6pt 0 0; text-align: center"><B>Three months ended</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 11.6pt 0 0; text-align: center"><B>December 31,</B></P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2016</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2015</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>$ Change</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>% Change</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 52%"><FONT STYLE="font-size: 10pt">United States</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">1,671,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">1,010,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">661,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">65%</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Latin America</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">465,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">465,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">100%</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font-size: 10pt">Europe and Rest of the World</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,038,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,202,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(164,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(14%</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,174,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,212,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">962,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">43%</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font-size: 10pt">Product license fees and royalties</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">44,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(44,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(100%</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Total</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">3,174,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">2,256,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">918,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">41%</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In the three months ended December 31, 2016,
product license fees and royalties revenue declined $44,000 as a result of loss of royalties related to our former dermatology
partner Exeltis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Service revenues for the three months ended
December 31, 2016 and 2015 were $187,000 and $227,000, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Gross Profit</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the three months ended December 31, 2016,
we reported total revenues of $3,361,000 and total cost of revenues of $1,655,000, resulting in total gross profit of $1,706,000
or 51% of total revenues, compared to gross profit of $455,000 or 18% of total revenues, for the same period in the prior year.
The increase in gross profit was primarily due to the reclassification, in the prior period, of Latin America product and license
revenue and related variable cost of goods sold from continuing operations to discontinued operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the three months ended December 31, 2016,
we reported product revenues of $3,174,000 and cost of product revenues of $1,476,000, resulting in product gross profit of $1,698,000,
or 53% of product revenues, compared to product gross profit of $361,000, or 16% of product revenues, for the same period in the
prior year. The increase in gross profit was primarily due to the reclassification, in the prior period, of Latin America product
and license revenue and related variable cost of goods sold from continuing operations to discontinued operations. Additionally,
as dermatology product revenues increase as an overall percentage of our product revenues, we expect our margins will improve due
to higher gross margins associated with our dermatology products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the three months ended December 31, 2016,
we reported service revenues of $187,000 and cost of service revenues of $179,000, resulting in service gross profit of $8,000,
or 4% of service revenues, compared to service gross profit of $50,000, or 22% of service revenues, for the same period in the
prior year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Research and Development Expense</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We reported research and development expense
of $487,000 for the three months ended December 31, 2016, an increase of $1,000 when compared to the same period in the prior year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Selling, General and Administrative Expense</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We reported selling, general and administrative
expenses of $4,784,000 for the three months ended December 31, 2016, an increase of $626,000, or 15%, when compared to the same
period in the prior year. The increase for the three months ended December 31, 2016 was primarily the result of higher selling
expenses related to our dermatology division primarily related to the addition of headcount and sampling and higher stock-compensation
expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We expect selling, general and administrative
expenses to increase as we add new territories and people to our direct sales force.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Interest Expense</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Interest expense was negligible for the three
months ended December 31, 2016 and 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 32; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->30<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Interest Income</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Interest income was negligible for the three
months ended December 31, 2016 and 2015. We expect interest income to increase in future periods due to increased cash on hand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Gain due to Change in Fair Value of Derivative
Liabilities</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with our December 9, 2013 and
February 26, 2014 registered direct offerings we issued a series of common stock purchase warrants, which contained cash settlement
provisions. During the quarter ended December 31, 2015, we recorded a gain due to a decrease in the fair value of our derivative
liabilities of $4,000, primarily due to a decrease in our common stock price and the decreasing contractual term of the warrants
during the period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Other Income (Expense), net</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Other income, net of $282,000 for the three
months ended December 31, 2016, increased $311,000, from $29,000 of other expense, net for the same period in the prior year. The
increase in other income, net for the three months ended December 31, 2016 was primarily related to foreign exchange gains in Mexico.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Net income from Continuing Operations</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net income from continuing operations for the
three months ended December 31, 2016 was $763,000 compared to a loss of $4,214,000, for the same period in the prior year. The
increase in net income of $4,977,000 is the primarily the result of a tax benefit recorded during the current period of $4,040,000
and the reclassification of Latin America product and license revenue and related variable cost of goods sold from continuing operations
to discontinued operations in the prior period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Comparison of the Nine Months Ended December
31, 2016 and 2015</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Results of Continuing Operations</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Revenues</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Total revenues for the nine months ended December
31, 2016 of $8,796,000 increased by $2,002,000 or 29%, as compared to $6,794,000 for the nine months ended December 31, 2015. Product
revenues for the nine months ended December 31, 2016 of $8,158,000 increased by $2,450,000 or 43% when compared to the same period
in the prior year. This increase was the result of strong growth in the United States and growth in Europe and the Rest of the
World. Product licensing fees and royalties decreased $231,000 related to the loss of our former partners Innovacyn and Exeltis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Product revenues in the United States for the
nine months ended December 31, 2016 of $4,741,000, increased by $1,758,000, or 59%, when compared to the same period in the prior
year. This increase was mostly the result of higher sales of our dermatology and animal health products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Product revenue in Europe and the Rest of the
World for the nine months ended December 31, 2016 of $2,952,000, increased by $227,000, or 8%, as compared to the same period in
the prior year, with increases in Europe, Asia and Middle East.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a result of the asset purchase agreement
and arrangement we entered into on October 27, 2016 with Invekra, we expect our revenues in Latin America will decrease significantly.
Pursuant to the arrangement, going forward we will receive a royalty of 3% on all Latin American net revenues (outside of Mexico),
with a minimum payment of $250,000 per year for the next ten years, to be paid quarterly in Mexican pesos.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Additionally, while Invekra sets up their manufacturing,
we will continue to supply Invekra with product at a reduced price. During the nine months ended December 31, 2016, we reported
$465,000 of Latin America product revenue related to Invekra.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 33; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->31<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows our product revenues
by geographic region:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Nine months ended</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>December 31,</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2016</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2015</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>$ Change</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>% Change</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 52%"><FONT STYLE="font-size: 10pt">United States</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">4,741,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">2,983,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">1,758,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">59%</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Latin America</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">465,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">465,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(100%</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font-size: 10pt">Europe and Rest of the World</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2,952,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2,725,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">227,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">8%</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">8,158,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5,708,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,450,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">43%</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font-size: 10pt">Product license fees and royalties</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">231,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(231,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(100%</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Total</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">8,158,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">5,939,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">2,219,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">37%</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In the nine months ended December 31, 2016,
product license fees and royalties revenue declined primarily as a result of a decrease in revenue related to our former dermatology
partner Exeltis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Service revenues for the nine months ended
December 31, 2016 of $638,000 decreased by $217,000 when compared to $855,000 in the prior period. This decrease was due to a decrease
in the number of tests and services provided by our lab services business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Gross Profit</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the nine months ended December 31, 2016,
we reported total revenues of $8,796,000 and total cost of revenues of $5,075,000, resulting in total gross profit of $3,721,000
or 42% of total revenues, compared to a gross profit of $1,677,000 or 25% of total revenues, for the same period in the prior year.
The increase in gross profit was primarily due to the reclassification, in the prior period, of Latin America product and license
revenue and related variable cost of goods sold from continuing operations to discontinued operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the nine months ended December 31, 2016,
we reported product revenues of $8,158,000 and cost of product revenues of $4,507,000, resulting in product gross profit of $3,651,000,
or 45% of product revenues, compared to product gross profit of $1,306,000, or 23% of product revenues, for the same period in
the prior year. The increase in gross profit was primarily due to the reclassification, in the prior period, of Latin America product
and license revenue and related variable cost of goods sold from continuing operations to discontinued operations. Additionally,
as dermatology product revenues increase as an overall percentage of our product revenues, we expect our margins will improve due
to higher gross margins associated with our dermatology products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the nine months ended December 31, 2016,
we reported service revenues of $638,000 and cost of service revenues of $568,000, resulting in service gross profit of $70,000,
or 11% of service revenues, compared to service gross profit of $140,000, or 16% of service revenues, for the same period in the
prior year. The decrease in service gross profit was primarily related to lower service revenue in the current period and the mix
of tests and services performed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Research and Development Expense</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We reported research and development expense
of $1,226,000 for the nine months ended December 31, 2016, a decrease of $139,000, or 10%, when compared to the same period in
the prior year. The decrease is largely due to a decrease in development milestone payments and license fees related to a dermatology
product from the prior period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Selling, General and Administrative Expense</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We reported selling, general and administrative
expenses of $12,557,000 for the nine months ended December 31, 2016, an increase of $1,146,000, or 10%, when compared to the same
period in the prior year. The increase for the nine months ended December 31, 2016 was primarily due to higher sales expenses related
to our dermatology division and higher stock compensation charges.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We expect selling, general and administrative
expenses to increase as we add territories and people to our direct sales force.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 34; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Interest Expense</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Interest expense was negligible for the nine
months ended December 31, 2016 and 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Interest Income</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Interest income was negligible for the nine
months ended December 31, 2016 and 2015. We expect interest income to increase in future periods due to increased cash on hand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Gain due to Change in Fair Value of Derivative
Liabilities</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with our December 9, 2013 and
February 26, 2014 registered direct offerings we issued a series of common stock purchase warrants, which contained cash settlement
provisions. During the nine months ended December 31, 2015, we recorded a gain due to a decrease in the fair value of our derivative
liabilities of $10,000, primarily due to a decrease in our common stock price, offset by the expiration of warrants and the decreasing
contractual term of outstanding warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Other Income, net</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Other income, net of $276,000 for the nine
months ended December 31, 2016, increased $245,000, from $31,000 of other income, net for the same period in the prior year. The
increase in other income, net for the three months ended December 31, 2016 was primarily related to foreign exchange gains in Mexico.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Net Loss from Continuing Operations</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net loss from continuing operations for the
nine months ended December 31, 2016 was $5,740,000 compared to $11,058,000, for the same period in the prior year. The decrease
in net loss of $5,318,000 is primarily the result of a tax benefit recorded during the current period of $4,040,000 and the reclassification
of Latin America product and license revenue and related variable cost of goods sold from continuing operations to discontinued
operations in the prior period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Comparison of Three and Nine Months Ended December 31, 2016 and
2015</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Discontinued Operations, net of Tax</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the three months ended December 31 2016
our Board of Directors took actions to divest certain assets related to our Latin American business. On October 27, 2016 we closed
on an asset purchase agreement with Invekra, S.A.P.I de C.V., an affiliate of Laboratorios Sanfer S.A. de C.V., for the sale of
certain of our Latin America assets. We decided to divest our Latin American business, resulting in a strategic shift that had
a major effect on our operations and financial results. Therefore, the divested Latin American operations meet the criteria to
be reported as discontinued operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The related assets, liabilities, results of
operations and cash flows for our Latin American business are classified as discontinued operations for all periods presented.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 22.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Income from discontinued operations, net of
tax for the three months ended December 31, 2016 and 2015 includes $559,000 and $1,065,000, respectively, of gross profit reclassified
from continuing operations to discontinued operations during the periods.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Income from discontinued operations for the
nine months ended December 31, 2016 and 2015 includes $2,544,000 and $3,806,000, respectively, of gross profit reclassified from
continuing operations to discontinued operations during the periods.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Gain on disposal of discontinued operations
for the three and nine months ended December 31, 2016, includes $19,487,000 of gain in each period primarily from the gain on sale
of intellectual property assets of our discontinued Latin American business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 35; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->33<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Additionally, for the three and nine months
ended December 31, 2016 the Company recorded income tax expense related to the transaction in the amount of $4,581,000 in each
of the periods.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The following summarizes operations of our Latin American business
included in discontinued operations:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Three Months Ended</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>December 31,</B></P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Nine Months Ended</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>December 31,</B></P></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2016</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2015</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2016</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2015</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 52%"><FONT STYLE="font-size: 10pt">Revenues</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">621,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">1,336,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">3,105,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">4,760,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Cost of Revenues</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">62,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">271,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">561,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">954,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font-size: 10pt">Income from discontinued operations before tax</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">559,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,065,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,544,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,806,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Gain on disposal of discontinued operations before income taxes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">19,487,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">19,487,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font-size: 10pt">Total income from discontinued operations, before tax</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">20,046,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,065,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">22,031,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,806,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Income Tax benefit (expense)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(4,581,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(4,581,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font-size: 10pt">Income from discontinued operations, net of tax</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">15,465,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">1,065,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">17,450,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">3,806,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Liquidity and Capital Resources</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We had net income of $11,710,000 for the nine
months ended December 31, 2016. At December 31, 2016 and March 31, 2016, our accumulated deficit amounted to $140,665,000 and $152,375,000,
respectively. At December 31, 2016 and March 31, 2016, our working capital amounted to $21,374,000 and $9,337,000, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 27, 2016, we, along with our Mexican
subsidiary and manufacturer Oculus Technologies of Mexico, S.A. de C.V., closed on an asset purchase agreement with Invekra, S.A.P.I
de C.V., an affiliate of Laboratorios Sanfer S.A. de C.V., for the sale of certain of our Latin America assets for an aggregate
purchase price of $22,000,000, with $18,000,000 paid in cash upon closing, $1,500,000 was held in escrow until completion of our
obligation to deliver certain equipment and paid to us on March 16, 2017, and $2,500,000 to be paid in Mexican currency in quarterly
installments over a period of ten years from closing as consideration for the provision of certain services and providing technical
assistance, calculated as three per cent on net sales of certain products in Latin America, excluding Mexico. Since the $2,500,000
is paid in foreign currency, we may receive more or less than $2,500,000 due to currency fluctuations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We currently anticipate that our cash and cash
equivalents, including the proceeds from the sale to Invekra, will be sufficient to meet our working capital requirements to continue
our sales and marketing and research and development efforts for at least 12 months from the date of filing this quarterly report.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Sources of Liquidity</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2016 we had cash and cash
equivalents of $18,983,000 which includes $18,000,000 of unrestricted cash we received from the sale to Invekra. Additionally,
we incurred approximately $556,000 of transaction costs related to the sale. Since our inception, substantially all of our operations
have been financed through sales of equity securities. Other sources of financing that we have used to date include our revenues,
as well as various loans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Since January 1, 2015, substantially all of
our operations have been financed through the following transactions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 96%; text-align: justify"><FONT STYLE="font-size: 10pt">proceeds of $14,000 received from the exercise of common stock purchase warrants and options;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 96%; text-align: justify"><FONT STYLE="font-size: 10pt">net proceeds of $5,444,000 received from an underwritten public offering on January 26, 2015;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 96%; text-align: justify"><FONT STYLE="font-size: 10pt">net proceeds of $5,335,000 received from the sale of Ruthigen common stock;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 96%; text-align: justify"><FONT STYLE="font-size: 10pt">net proceeds of $2,994,000 received from an underwritten public offering on March 18, 2016; and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 96%; text-align: justify"><FONT STYLE="font-size: 10pt">net proceeds of $4,491,000 received from the sale of common stock through our At the Market Issuance Sales Agreement as of December 31, 2016.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 36; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->34<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 27, 2016, we, along with our Mexican
subsidiary and manufacturer Oculus Technologies of Mexico, S.A. de C.V., closed on an asset purchase agreement with Invekra, S.A.P.I
de C.V., an affiliate of Laboratorios Sanfer S.A. de C.V., for the sale of certain of our Latin America assets for an aggregate
purchase price of $22,000,000, with $18,000,000 paid in cash upon closing, $1,500,000 was held in escrow until completion of our
obligation to deliver certain equipment and paid to us on March 16, 2017, and $2,500,000 to be paid in Mexican currency in quarterly
instalments over a period of ten years from closing as consideration for the provision of certain services and providing technical
assistance, calculated as three per cent on net sales of certain products in Latin America, excluding Mexico. Because the $2,500,000
is paid in foreign currency, we may receive more or less than $2,500,000 due to currency fluctuations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Cash Flows for the year ended March 31, 2016, and 2015</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of March 31, 2016, we had cash and cash
equivalents of $7,469,000, compared to $6,136,000 as of March 31, 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net cash used in operating activities during
the year ended March 31, 2016 was $8,746,000, primarily due to our net loss of $10,162,000, offset by non-cash transactions during
the year ended March 31, 2016, including $2,341,000 of stock-based compensation expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net cash used in operating activities during
the year ended March 31, 2015 was $6,694,000, primarily due to our net loss of $8,203,000, offset by non-cash transactions during
the year ended March 31, 2015, including: $4,650,000 of impairment loss related to our investment in Ruthigen; a $3,164,000 gain
on the fair value adjustment of our derivative liabilities; and $1,771,000 of stock-based compensation expenses and $1,499,000
of upfront fees amortized related to More Pharma.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net cash provided by investing activities was
$4,191,000 for the year ended March 31, 2016, consisting of $345,000 related to equipment purchases offset by $4,538,000 received
from the sale of 1,650,000 of our shares of Ruthigen common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net cash provided by investing activities was
$875,000 for the year ended March 31, 2015, consisting of $139,000 related to equipment purchases offset by $963,000 received from
the sale of 350,000 of our shares of Ruthigen common stock and $51,000 related to changes in long-term assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net cash provided by financing activities was
$6,039,000 for the year ended March 31, 2016. During the period ended March 31, 2016, we received net proceeds from the March 18,
2016 underwritten offering of common stock and common stock purchase warrants of $2,994,000 and net proceeds of $3,150,000 from
an At the Market Issuance of common stock. The offering proceeds were offset by principal payments on the debt in the amount of
$119,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net cash provided by financing activities was
$6,609,000 for the year ended March 31, 2015. During the period ended March 31, 2015, we received net proceeds from the January
26, 2015 underwritten offering of common stock and common stock purchase warrants of $5,444,000 and net proceeds of $1,341,000
from an At the Market Issuance of common stock. The offering proceeds were offset by principal payments on the debt in the amount
of $176,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Cash Flows for the Nine Months Ended December
31, 2016 and 2015</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2016, we had cash and cash
equivalents of $18,983,000, compared to $7,469,000 as of March 31, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net cash used in operating activities during
the nine months ended December 31, 2016 was $5,472,000, primarily due to our net income in the period of $11,710,000 which was
offset by adjustments to net income related to our gain on sale of our Latin American assets to, net of tax, of $14,906,000 and
the income tax benefit realized of $4,040,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net cash used in operating activities during
the nine months ended December 31, 2015 was $7,024,000, primarily due to our net loss of $7,252,000. Additionally during the nine
months ended December 31, 2015 we had an increase in accounts receivable of $1,351,000 primarily due to increased product revenues,
offset by $1,459,000 in stock related compensation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net provided by investing activities was $17,232,000
for the nine months ended December 31, 2016, consisting of primarily proceeds from the sale of our Latin American Assets, net of
costs, of $17,444,000, offset by $195,000 related to equipment purchases and $17,000 related to changes in long-term assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 37; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->35<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net cash provided by investing activities was
$4,180,000 for the nine months ended December 31, 2015, consisting of $4,538,000 received from the sale of 1,650,000 of our shares
of Ruthigen common stock, offset by $353,000 related to equipment purchases and $5,000 related to changes in long-term assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net cash used in financing activities was $119,000
for the nine months ended December 31, 2016, primarily related to principal payments on debt.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net cash provided by financing activities was
$2,876,000 for the nine months ended December 31, 2015, primarily related to $2,949,000 of net proceeds received from At-the-Market
Issuances of common stock which was offset by principal payments on debt in the amount of $87,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Contractual Obligations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of March 31, 2016, we had contractual obligations
as follows (long-term debt amounts include principal payments only:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="14" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Payments Due by Period</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Less Than</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>1 Year</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>1-3</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Years</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>After</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>3 Years</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 36%"><FONT STYLE="font-size: 10pt">Long-term debt</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font-size: 10pt">114,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font-size: 10pt">114,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&ndash;</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Operating leases</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">691,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">370,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">312,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font-size: 10pt">Total</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">805,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">484,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">312,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Operating Capital and Capital Expenditure Requirements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We had net income of 11,710,000 for the nine
months ended December 31, 2016. At December 31, 2016 and March 31, 2016, our accumulated deficit amounted to $140,665,000 and $152,375,000,
respectively. At December 31, 2016 and March 31, 2016, our working capital amounted to $21,374,000 and $9,337,000, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 27, 2016, we, along with our Mexican
subsidiary and manufacturer Oculus Technologies of Mexico, S.A. de C.V., closed on an asset purchase agreement with Invekra, S.A.P.I
de C.V., an affiliate of Laboratorios Sanfer S.A. de C.V., for the sale of certain of our Latin America assets for an aggregate
purchase price of $22,000,000, with $18,000,000 paid in cash upon closing, $1,500,000 was held in escrow until completion of our
obligation to deliver certain equipment and paid to us on March 16, 2017, and $2,500,000 to be paid in Mexican currency in quarterly
installments over a period of ten years from closing as consideration for the provision of certain services and providing technical
assistance, calculated as three per cent on net sales of certain products in Latin America, excluding Mexico. Since the $2,500,000
is paid in foreign currency, we may receive more or less than $2,500,000 due to currency fluctuations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We may need to raise additional capital from
external sources in order to continue the longer term efforts contemplated under our business plan. We expect to continue incurring
losses for the foreseeable future and may need to raise additional capital to pursue our product development initiatives and to
penetrate markets for the sale of our products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.8pt 0 0; text-align: justify">Our future funding requirements will
depend on many factors, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 96%; text-align: justify"><FONT STYLE="font-size: 10pt">Our current and future revenues;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 96%; text-align: justify"><FONT STYLE="font-size: 10pt">the scope, rate of progress and cost of our research and development activities;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 96%; text-align: justify"><FONT STYLE="font-size: 10pt">future clinical trial results;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 96%; text-align: justify"><FONT STYLE="font-size: 10pt">the terms and timing of any collaborative, licensing and other arrangements that we may establish;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>


<!-- Field: Page; Sequence: 38; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->36<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 96%; text-align: justify"><FONT STYLE="font-size: 10pt">the cost and timing of regulatory approvals;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 96%; text-align: justify"><FONT STYLE="font-size: 10pt">the cost and delays in product development as a result of any changes in regulatory oversight applicable to our products;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 96%; text-align: justify"><FONT STYLE="font-size: 10pt">the cost and timing of establishing sales, marketing and distribution capabilities;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 96%; text-align: justify"><FONT STYLE="font-size: 10pt">the effect of competing technological and market developments;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 96%; text-align: justify"><FONT STYLE="font-size: 10pt">the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 96%; text-align: justify"><FONT STYLE="font-size: 10pt">the extent to which we acquire or invest in businesses, products and technologies.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Off-Balance Sheet Transactions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We currently have no off-balance sheet arrangements
that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 1.4pt; text-indent: -0.5pt"><FONT STYLE="text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1.55pt; text-align: justify; text-indent: -0.5pt"><B>Changes
In and Disagreements with Accountants on Accounting and Financial Disclosure </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">There have been no
disagreements with our independent public accountant in regards to accounting and financial disclosure.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1.25pt; text-align: justify; text-indent: -0.5pt"><B>Quantitative
and Qualitative Disclosures about Market Risk </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a smaller reporting company as defined by
Rule&nbsp;12b-2 of the Exchange Act and in Item&nbsp;10(f)(1) of Regulation&nbsp;S-K, we are electing scaled disclosure reporting
obligations and therefore are not required to provide the information requested by this Item.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 2.6pt; text-align: center; text-indent: -0.5pt"><B><A NAME="a9"></A>OUR BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Corporate Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We incorporated under the laws of the State
of California in April 1999 as Micromed Laboratories, Inc. In August 2001, we changed our name to Oculus Innovative Sciences, Inc.
In December 2006, we reincorporated under the laws of the State of Delaware. On December 6, 2016, we changed our name from Oculus
Innovative Sciences, Inc. to Sonoma Pharmaceuticals, Inc. Our principal executive offices are located at 1129&nbsp;N.&nbsp;McDowell
Blvd., Petaluma, California, 94954, and our telephone number is (707)&nbsp;283-0550. We have two principal wholly-owned subsidiaries:
Oculus Technologies of Mexico, S.A. de C.V., organized in Mexico; and Oculus Innovative Sciences Netherlands, B.V., organized in
the Netherlands. Our fiscal year end is March&nbsp;31. Our website is www.sonomapharma.com. We do not intend for information on
our website to be incorporated into this annual report.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We are a specialty pharmaceutical company dedicated
to identifying, developing and commercializing unique, affordable differentiated therapies to improve the lives of patients with
dermatologic diseases or conditions. Our products, which are sold throughout the United States and internationally, have improved
patient outcomes for more than five million patients globally by treating and reducing certain topical skin diseases including
acne, atopic dermatitis, scarring, infections, itch, pain and harmful inflammatory responses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We currently focus on the development and commercialization
of therapeutic solutions in medical dermatology to treat or reduce skin conditions, such as acne, atopic dermatitis and scarring.
These diseases impact millions of patients worldwide and can have significant, multi-dimensional effects on patients&rsquo; quality
of life, including their physical, functional and emotional well-being.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 39; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->37<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Since our founding in 1999, we built our business
by developing and promoting products via partnerships for multiple therapeutic indications, with a primary focus on advanced tissue
care. Starting in 2013, with a new Board of Directors and new management team, we pivoted to focus on one specialty pharmaceutical
area, medical dermatology, and created our own sales force in the United States to promote our unique, affordable, differentiated
prescription dermatology products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Some of our key products in the United States
are:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Celacyn&reg;, a prescription hypochlorous acid based scar management gel clinically proven to soften and flatten raised scars while reducing redness and discoloration.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Ceramax&trade; Skin Barrier Cream helps manage dry itchy skin, minor skin irritations, rashes, and inflammation caused by various skin conditions.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Alevicyn&trade;, a prescription hypochlorous acid based atopic dermatitis product line clinically proven to reduce pruritus (itch) and pain associated with various dermatoses.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Mondoxyne&trade;, a prescription oral tetracycline antibiotic used for the treatment of certain bacterial infections, including acne. </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Microcyn&reg; (sold under a variety of brand names), a line of products based on electrically charged oxychlorine small molecules designed to target a wide range of pathogens including viruses, fungi, spores and bacteria, including antibiotic-resistant strains.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our key product outside the United States is:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Microcyn&reg; or Microdacyn60&reg; (sold under a variety of brand names), a line of products based on electrically charged oxychlorine small molecules designed to target a wide range of pathogens including viruses, fungi, spores and bacteria, including antibiotic-resistant strains.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">To date, we have obtained 16 clearances from
the U.S. Food and Drug Administration, or FDA, that permit us to sell our products as medical devices for Section 510(k) of the
Federal Food, Drug and Cosmetic Act in the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Outside the United Sates, we sell products
for dermatological and advanced tissue care with a European Conformity marking (known as Conformit&eacute; Europ&eacute;enne or
CE) covering 25 of our products, and various approvals in China, Southeast Asia, South Korea, India, Australia, New Zealand, and
the Middle East.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">On October 27, 2016,
we, along with our Mexican subsidiary and manufacturer Oculus Technologies of Mexico, S.A. de C.V., closed on an asset purchase
agreement with Invekra, S.A.P.I de C.V., an affiliate of Laboratorios Sanfer S.A. de C.V., for the sale of certain of our Latin
America assets. Specifically, we agreed to sell certain patents, patent applications, trademarks and territory rights for Mexico,
the Caribbean and South America, excluding the sale of dermatology products in Brazil, as well as to build and deliver equipment
that Invekra will use to produce its own product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The aggregate purchase price that Invekra will
pay for the assets is $22,000,000, of which $18,000,000 was paid upon closing, $1,500,000 was held in escrow until completion of
our obligation to deliver certain equipment and paid to us on March 16, 2017, and $2,500,000 will be paid in Mexican currency in
quarterly installments over a period of ten years from closing as consideration for the provision of certain services and providing
technical assistance, calculated as three per cent on net sales of certain products in Latin America, excluding Mexico. Since the
$2,500,000 is to be paid in foreign currency, we may receive more or less than $2,500,000 due to currency fluctuations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a result of the asset purchase agreement
and arrangement, we expect our revenues in Latin America will decrease significantly. Pursuant to the arrangement, going forward
we will receive a royalty of 3% on all Latin American net revenues (outside of Mexico), with a minimum payment of $250,000 per
year for the next ten years, to be paid quarterly in Mexican pesos. Due to currency fluctuations, we may not receive the full $250,000
in U.S. dollars. Additionally, while Invekra sets up their manufacturing, we will continue to supply Invekra with product at a
reduced price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 40; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->38<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We believe that the sale of the Latin America
assets is in line with our overall turnaround strategy to focus on our core dermatology business and generate cash from our non-core
businesses to support the higher margin and higher-growth dermatology business. As a result of the sale of our Latin America assets,
we expect our Latin America revenues will decrease and our total revenues will decrease in the short-term until our U.S. based
dermatology revenues increase longer-term. We believe focusing on higher margin dermatology products, utilizing an internal sales
force, allows us to better control and grow our future results rather than relying on external partners for marketing and sales.
We intend to use the proceeds from the sale of the Latin America assets to increase our direct sales force and grow our product
line and continue to expand our markets and Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Our Strategy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our strategy is to in-license, acquire, develop
and commercialize unique, affordable and differentiated therapies that we believe advance the standard of care for patients with
dermatological diseases. The key components of our strategy are to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>Expand our Internal U.S. Sales Force:</B> We continue to hire additional experienced sales people who have established relationships with&nbsp;dermatologists in their territories and are expecting to have a sales force of 30 by the end of March 2017.&nbsp;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>Develop and Launch New Dermatology Products:</B> We currently sell eight prescription dermatology&nbsp;products in the United States, and have a strong product pipeline of new products, including an oral anti-infective for severe acne and Ceramax&trade;, which utilizes a &ldquo;state of the art&rdquo; skin repair technology. </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>Create a Competitive Pricing Strategy:</B> We have and will continue to develop a unique product pricing&nbsp;strategy, which we believe solves many of the challenges associated with the prescription dermatology market&rsquo;s current pricing&nbsp;and rebate programs.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>Develop a Pharmaceutical Line:</B> We plan to acquire or develop pharmaceutical products with affordable clinical trials to increase our market&nbsp;presence and create innovator patent protection.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our plan is to evolve into a leading dermatology
company, providing innovative and cost-effective solutions to patients, while generating strong,&nbsp;consistent revenue growth
and maximizing long-term shareholder value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 41; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->39<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><A NAME="a10"></A><B>OUR PRODUCTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In the United States some of our key dermatology
products are:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>Celacyn&reg; &ndash; Prescription Scar
Management Gel</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 20%"><IMG SRC="image_001.jpg" ALT=""></TD>
    <TD STYLE="width: 80%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Celacyn&reg;, is a prescription hypochlorous
        acid based scar management gel designed to soften and flatten raised scars while reducing redness and discoloration. In our studies,
        Celacyn&reg; has been shown to reduce scar itch pain and performed better than the market-leading comparable gel brand. In the
        United States, topical prescription scar treatment products are usually sold over the counter. By contrast, we actively market
        Celacyn&reg; to clinicians.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Scars are a natural part of the healing process
        and a reaction to skin injury. Scars form when the dermis, or the lower level of the skin, is damaged and then repaired by a process
        called granulation, where the body produces collagen fibers to repair the damage. Celacyn&reg; works on keloid and hypertrophic
        scars. Keloid scars continue to grow after the skin has healed which causes the scars to grow beyond the originally damaged area.
        Hypertrophic scars are marked by excessive scar tissue in a local area and appear thick, red and lumpy.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Celacyn&reg; scar gel is intended for the management
        of old and new scars resulting from burns, general surgical procedures and trauma wounds.</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 94.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 94.5pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>Ceramax&trade; &ndash; Skin Barrier Cream</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 20%"><IMG SRC="image_002.jpg" ALT=""></TD>
    <TD STYLE="width: 80%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Ceramax&trade; Skin Barrier Cream helps manage
        dry itchy skin, minor skin irritations, rashes, and inflammation caused by various skin conditions based on patented Lipogrid&reg;
        Technology. Ceramax&trade; Skin Barrier Cream can be used to treat a variety of disease states with skin barrier disruption, including
        eczema and atopic dermatitis.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">According to the National Eczema Association,
        eczema or atopic dermatitis affects over 10% of the children in the United States and one out of every three children with eczema
        or atopic dermatitis have moderate to severe symptoms. Additionally, 31.6 million people have some form of eczema with approximately
        17.8 million of those having moderate to severe eczema or atopic dermatitis.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Ceramax&trade; Skin Barrier Cream is intended
        to be used as a topical skincare preparation to relieve and manage the burning and itching associated with various skin conditions,
        including atopic dermatitis, and other dry skin conditions, by maintaining a moist wound and skin environment. Lipogrid&reg; Technology
        contains lipids that blend in with the skin&rsquo;s natural lipid building blocks to hydrate and restore the natural skin barrier
        and penetrate the skin.</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 94.5pt; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 42; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->40<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 94.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>Alevicyn&trade; SG Antipruritic Spray
Gel, Dermal Spray and Antipruritic Gel</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 20%"><IMG SRC="image_003.jpg" ALT=""></TD>
    <TD STYLE="width: 80%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Alevicyn&trade; is indicated to manage and
        relieve the burning, itching and pain experienced with various types of skin conditions, including radiation dermatitis and atopic
        dermatitis. It may be also used to relieve the pain of first- and second-degree burns, and helps to relieve dry waxy skin by maintaining
        a moist wound and skin environment, which is beneficial to the healing process. Alevicyn&trade; Antipruritic Gel is intended for
        management of itch and pain associated with dermal irritations and wounds, such as sores, injuries and ulcers of dermal tissue.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Alevicyn&trade; Antipruritic Spray gel&rsquo;s
        unique formulation is a &ldquo;spray-on&rdquo; that does not run or drip after application and no &ldquo;rubbing-in&rdquo; is required
        on sensitive or difficult-to-access areas of the body. Alevicyn&trade; dermal spray is intended for the cleansing, irrigation,
        moistening, debridement and removal of foreign material including microorganisms and debris from wounds, among others, first- and
        second-degree bums, abrasions, minor irritations of the skin, diabetic foot ulcers, and ingrown toe nails.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>Mondoxyne&trade; &ndash; Prescription
Oral Antibiotic</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 20%"><IMG SRC="image_004.jpg" ALT=""></TD>
    <TD STYLE="width: 80%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Mondoxyne&trade; is a prescription oral tetracycline
        antibiotic that contains doxycycline, a broad spectrum antibacterial synthetically derived from oxytertracycline, used as a treatment
        for acne vulgaris.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">According to the British Association of Dermatologists,
        acne vulgaris is estimated to affect 660 million people, or 9.4% of the global population, and it is the eighth most common disease
        worldwide. Acne is thought to have multiple contributing factors, including, among other things, excess sebum, or oil, production,
        which creates an optimal environment for the proliferation of the bacterium <I>Propionibacterium acnes</I>. The <I>Propionibacterium
        acnes </I>bacteria feed on the sebum and secrete enzymes and other byproducts that irritate the skin and result in the inflammation
        commonly known as acne.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Mondoxyne&trade; is an oral antibiotic that
        can be effective against acne because of its antimicrobial and anti-inflammatory activity. It is usually prescribed as adjunct
        therapy for severe inflammatory acne. Mondoxyne&trade; treats acne by targeting the bacterium <I>Propionibacterium acnes</I>. Patients
        have rated doxycycline, the active ingredient in Mondoxyne&trade;, as effective or very effective in 85% of cases, as reported
        by a 1989 double-blind study published in the <I>Journal of Dermatological Treatment</I> comparing the effectiveness of doxycycline
        and minocycline in the treatment of moderate to moderately severe acne.</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>Microcyn&reg; -Advanced Tissue Care Management</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: top; width: 30%"><FONT STYLE="font-family: Sans-Serif; font-size: 9pt; color: Red"><B><IMG SRC="image_005.jpg" ALT=""></B></FONT><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 70%; text-align: justify"><FONT STYLE="font-size: 10pt">Microcyn&reg; is based on electrically charged oxychlorine small molecules designed to target a wide range of pathogens including viruses, fungi, spores and bacteria, including antibiotic-resistant strains. Several Microcyn&reg; Technology advanced tissue care products are designed to treat infections and enhance healing while reducing the need for antibiotics. When a wound is slow to heal or becomes hard to heal, the costs to treat increase and the quality of life for the patient also suffers as infected, malodorous wounds prevent them from participating in daily life activities. As a result of our patented manufacturing process, Microcyn&reg; is a proprietary solution of oxychlorine compounds that, among other things, interacts with and inactivates surface proteins on cell walls and membranes of microorganisms. The functions of these proteins are varied and play significant roles in cell communication, nutrient and waste transport and other required functions for cell viability. </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 43; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->41<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Once Microcyn&reg; surrounds single cell microorganisms,
it damages these proteins, causing the cell membrane to rupture, leading to cell death, which we believe is caused by increased
membrane permeability and induced osmotic pressure imbalance. This destruction of the cell appears to occur through a fundamentally
different process than that which occurs as a result of contact with a bleach-based solution because experiments have demonstrated
that Microcyn&reg; kills bleach-resistant bacteria. However, we believe the solution remains non-irritating to human tissues because
human cells have unique protective mechanisms, are interlocked, and prevent Microcyn&reg; from targeting and surrounding single
cells topically on the body. Laboratory tests suggest that our solution does not penetrate and kill multi-cellular organisms, and
does not damage or affect human DNA.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In laboratory tests, Microcyn&reg; has been
shown to destroy certain biofilms. A biofilm is a complex cluster of microorganisms or bacteria marked by the formation of a protective
shell, allowing the bacteria to collect and proliferate. It is estimated that over 65% of microbial infections in the body involve
bacteria growing as a biofilm. Bacteria living in a biofilm typically have significantly different properties from free-floating
bacteria of the same species. One result of this film environment is increased resistance to antibiotics and to the body&rsquo;s
immune system. In chronic wounds, biofilms interfere with the normal healing process and halt or slow wound closure. Bacteria growing
in biofilms can become up to 1000-fold more resistant to antibiotics and other biocides as compared to their planktonic, or free
floating, counterparts.&nbsp;As a result, biofilm infections cannot be effectively treated with conventional antibiotic therapy.&nbsp;&nbsp;In
our laboratory studies, Microcyn&reg; was shown to destroy two common biofilms after five minutes of exposure.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In published studies, Microcyn&reg; has been
shown to significantly increase the dilation of capillaries in wounds as indicated by higher levels of oxygen at a wound site after
the application of our product and also to reduce inflammation by inhibiting certain inflammatory responses from allergy-producing
mast cells. It is widely accepted that reducing chronic inflammation surrounding an injury or wound is beneficial to wound healing.
Our laboratory research suggests that Microcyn&reg;&rsquo;s interference with these cells is selective to only the inflammatory
response and does not interfere with other functions of these cells. Microcyn&reg; Technology has demonstrated antimicrobial activity
against numerous bacterial, viral and fungal pathogens, including antibiotic-resistant strains, as evidenced by passing results
in numerous standardized laboratory microbiology tests conducted on our 510(k) approved technology by a variety of certified independent
testing laboratories.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Regulatory Approvals and Clearances</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">To date, we have obtained 16 clearances from
the U.S. Food and Drug Administration, or FDA, that permit us to sell our products as medical devices for Section 510(k) of the
Federal Food, Drug and Cosmetic Act in the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Outside the United Sates, we sell products
for dermatological and advanced tissue care with a European Conformity marking (known as Conformit&eacute; Europ&eacute;enne or
CE) covering 25 of our products, and various approvals in China, Southeast Asia, and the Middle East.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 44; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->42<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The following table
summarizes our material current regulatory approvals and clearances by brand:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Brand </B></FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt"><B>Approval Type</B></FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt"><B>Year of Approval</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Summary Indication</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Lasercyn&trade;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: justify">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">U.S. 510(k)</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">2016</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD ROWSPAN="3" STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Indicated for the management of post non ablative laser therapy procedures, post microdermabrasion therapy and following superficial chemical peels; and to relieve itch and pain from minor skin irritations, lacerations, abrasions and minor burns.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">EU CE Mark</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">2016</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">MucoClyns&trade;</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3"><FONT STYLE="font-size: 10pt">EU CE Mark</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">2016</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Indicated for the use in emergencies, safe to use on mucous membranes, cuts, abrasions, burns and body surfaces for the treatment immediately after an unexpected exposure to infection risk, and professional medical attention.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Sinudox&trade;</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3"><FONT STYLE="font-size: 10pt">EU CE Mark</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">2016</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD ROWSPAN="2" STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Solution intended for nasal irrigation, including the moistening of cuts, abrasions and lacerations located in the nasal cavity.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">SebDerm Gel</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3"><FONT STYLE="font-size: 10pt">U.S. 510(k)</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">2015</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Manages and relieves the burning, itching, erythema, scaling, and pain experienced with seborrhea and seborrheic dermatitis. It also helps to relieve dry, waxy skin by maintaining a moist wound and skin environment, which is beneficial to the healing process.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Celacyn&reg;</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3"><FONT STYLE="font-size: 10pt">U.S. 510(k)</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">2013</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">As hydrogel for the management of old and new hypertrophic and keloid scarring resulting from burns, general surgical procedures and trauma wounds.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Alevicyn&trade;</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3"><FONT STYLE="font-size: 10pt">U.S. 510(k)</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">2011</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD ROWSPAN="4" STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">As a hydrogel, for management and relief of burning, itching and pain experienced with various types of dermatoses, including atopic dermatitis and radiation dermatitis.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3"><FONT STYLE="font-size: 10pt">EU CE Mark</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">2013</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Epicyn&trade;</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3"><FONT STYLE="font-size: 10pt">U.S. 510(k)</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">2011</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD ROWSPAN="4" STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Manages and relieves itching, burning and pain experienced with various types of dermatoses, including atopic dermatitis, first and second degree burns. Indicated as an adjuvant in the wound healing process with wounds that can only heal by secondary intention in maturation phase. Epicyn&trade; is effective for the management and reduction of new and existing hypertrophic and keloid scars. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3"><FONT STYLE="font-size: 10pt">EU CE Mark</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">2013</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD ROWSPAN="4"><FONT STYLE="font-size: 10pt">Microcyn&trade; Skin&nbsp;and Wound Care or HydroGel </FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3"><FONT STYLE="font-size: 10pt">U.S. 510(k)</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">2010</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD ROWSPAN="4" STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">As a solution or hydrogel, for debridement and moistening of acute and chronic wounds, ulcers, cuts, abrasions and burns, including those located in any human cavity such as the oral, nasal or ear. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3"><FONT STYLE="font-size: 10pt">EU CE Mark</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">2013</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Gramaderm&reg;</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3"><FONT STYLE="font-size: 10pt">EU CE Mark</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">2013</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD ROWSPAN="2" STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">As a dermatological solution or hydrogel for the topical treatment of mild to moderate acne.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Microcyn&trade; Skin&nbsp;and Wound Cleanser</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">U.S. 510(k)</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center">2009</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD><TD STYLE="text-align: justify">Debridement of wounds, such as stage I-IV pressure ulcers, diabetic foot ulcers, post-surgical wounds, first- and second-degree burns, grafted and donor sites as preservative, which can kill listed bacteria such as MRSA &amp; VRE and required as a prescription.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD><TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Microcyn&trade; Wound Gel</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3">U.S. 510(k)</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center">2009</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD><TD STYLE="text-align: justify">Manages exuding wounds such as leg ulcers, pressure ulcers, diabetic ulcers and mechanical or surgical debridement of wounds in a gel form.</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="width: 1px">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="width: 2px">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD>Alevicyn&trade; SG Antipruritic Gel</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>U.S. 510(k)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">2015</TD>
    <TD>&nbsp;</TD>
    <TD>As a thin hydrogel, for the management and relief of burning, itching and pain experienced with various types of dermatoses, including atopic dermatitis and radiation dermatitis.</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD>Ceramax&trade; Skin Barrier Cream</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>U.S. 510(k)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">2015</TD>
    <TD>&nbsp;</TD>
    <TD>Management of dry itchy skin, minor skin irritations, rashes, and inflammation caused by various skin conditions based on patented Lipogrid&reg; Technology.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>


<!-- Field: Page; Sequence: 45; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->43<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Clinical Trials</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have completed a proof-of-concept Phase&nbsp;II
trial in the United States, which demonstrated the effectiveness of Microcyn&reg; Technology in mildly infected diabetic foot ulcers
with the primary endpoint of clinical cure and improvement of infection. We used 15 clinical sites and enrolled 48 evaluable patients
in three arms, using Microcyn&reg; alone, Microcyn&reg; plus an oral antibiotic and saline plus an oral antibiotic. We announced
the results of our Phase&nbsp;II trial in March 2008. In the clinically evaluable population of the study, the clinical success
rate at visit four, or test of cure, for Microcyn&reg;-alone-treated patients was 93.3% compared to 56.3% for the oral antibiotic
levofloxacin plus saline-treated patients. This study was not statistically powered, but the high clinical success rate (93.3%)
and the p-value (0.033) suggest the difference is meaningfully positive for the Microcyn&reg;-treated patients. Also, for this
set of data, the 95.0% confidence interval for the Microcyn&reg;-only arm ranged from 80.7% to 100% while the 95.0% confidence
interval for the oral antibiotic levofloxacin and saline arm ranged from 31.9% to 80.6%; the confidence intervals do not overlap,
indicating a favorable clinical success for Microcyn&reg; compared to the oral antibiotic levofloxacin. At visit three (end of
treatment), the clinical success rate for patients treated with Microcyn&reg;-alone was 77.8% compared to 61.1% for the oral antibiotic
levofloxacin plus saline-treated patients. We have not done any subsequent clinical trials in the drug process for tissue care.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Domestic Sales and Marketing</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In the United States, we sell into dermatology
markets through our IntraDerm&trade; Pharmaceuticals division staffed with a seasoned management and sales team. We sell into the
advanced tissue care markets with our dedicated contract sales force, and the animal health market through our business partners.
Our dermatology products are primarily purchased by distributors and wholesalers, pharmacies and dermatologist. Our tissue care
products are primarily purchased by hospitals, physicians, nurses, and other healthcare practitioners, who are the primary caregivers
to patients, both human and animal, being treated for acute or chronic wounds or undergoing surgical procedures, as well as to
dermatologists for treatment of various skin afflictions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Although specific customer requirements can
vary depending on applications, customers generally demand quality, innovation, affordability and clinically-supported efficacy.
We have responded to these customer demands by introducing new products focused on these requirements in the markets we serve.
Specifically, we believe that we introduce new products and applications that are innovative, address the specific dermatological
procedures in demand, and supported by human clinical data. In addition, we provide attractive product line extensions and pricing
to new product families. In the future to increase market penetration, in addition to marketing to our core dermatologists, we
may also market our products to aesthetic dermatologists and plastic surgeons.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We seek to establish strong ongoing relationships
with our customers through the new products, sales of existing products, ongoing training and support, and distributing skincare
products. We primarily target our marketing efforts to practitioners through office visits, workshops, trade shows, webinars and
trade journals. We also market to potential patients through brochures, workshops and our website. In addition, we offer clinical
forums with recognized expert panelists to promote advanced treatment techniques using our products to further enhance customer
loyalty and uncover new sales opportunities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>International Sales and Marketing by Our
Strategic Business Partners</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="color: #222222">We sell our products
through a worldwide distributor network in over 40 countries. </FONT>In the international markets, we work with a network of partners,
ranging from country specific distributors to a large pharmaceutical company to a full services sales and marketing company. International
sales are generally made through a worldwide distributor network in over 40 countries. Our international revenue as a percentage
of total revenue represented 67% in FY 2016 and 73% in FY 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Europe</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We currently rely on exclusive agreements with
country-specific distributors for the sale of Microcyn&reg;-based products in Europe, including Austria, Belgium, Italy, Luxemburg,
the Netherlands, Germany, Greece, the Czech Republic, Sweden, Spain, Norway, Switzerland, Poland, Finland, Denmark and Serbia.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 46; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->44<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Mexico</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In Mexico, we partner with Laboratorios Sanfer
S.A. de C.V. Laboratorios Sanfer is one of the largest independent pharmaceutical companies in Mexico, operating in nine countries
across Latin America. Laboratorios Sanfer manufactures, markets and sells prescription and over the counter branded medications
across five therapeutic areas including gastroenterology, cardiology, anti-infective and dermatology. Pursuant to our agreement
with Laboratorios Sanfer, we granted Laboratorios Sanfer an exclusive license, with the right to sublicense, under certain conditions
and with our consent, to all of our proprietary rights related to certain of our pharmaceutical products for human application
that utilize our Microcyn&reg; technology within Mexico. We also agreed to appoint Laboratorios Sanfer as the exclusive distributor
of certain of our products in Mexico for the term of the agreement, and an exclusive license to certain of our then-held trademarks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">On October 27, 2016,
we, along with our Mexican subsidiary and manufacturer Oculus Technologies of Mexico, S.A. de C.V., closed on an asset purchase
agreement with Invekra, S.A.P.I de C.V., an affiliate of Laboratorios Sanfer S.A. de C.V., for the sale of certain of our Latin
America assets. Specifically, we agreed to sell certain patents, patent applications, trademarks and territory rights for Mexico,
the Caribbean and South America, excluding the sale of dermatology products in Brazil, as well as to build and deliver equipment
that Invekra will use to produce its own product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The aggregate purchase price that Invekra will
pay for the assets is $22,000,000, of which $18,000,000 was paid upon closing, $1,500,000 was held in escrow until completion of
our obligation to deliver certain equipment and paid to us on March 16, 2017, and $2,500,000 will be paid in Mexican currency in
quarterly installments over a period of ten years from closing as consideration for the provision of certain services and providing
technical assistance, calculated as three per cent on net sales of certain products in Latin America, excluding Mexico. Since the
$2,500,000 is to be paid in foreign currency, we may receive more or less than $2,500,000 due to currency fluctuations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a result of the asset purchase agreement
and arrangement, we expect our revenues in Latin America will decrease significantly. Pursuant to the arrangement, going forward
we will receive a royalty of 3% on all Latin American net revenues (outside of Mexico), with a minimum payment of $250,000 per
year for the next ten years, to be paid quarterly in Mexican pesos. Due to currency fluctuations, we may not receive the full $250,000
in U.S. dollars. Additionally, while Invekra sets up their manufacturing, we will continue to supply Invekra with product at a
reduced price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&ldquo;Rest of World&rdquo;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Through our partner Laboratorios Sanfer, we
market and sell certain of our products within the following countries: Antigua &amp; Barbuda, Argentina, Aruba &amp; Curacao,
Bahamas, Barbados, Belize, Bolivia, Bonaire, Brazil, British Guyana, British Islands, Cayman Islands, Chile, Colombia, Cuba, Dominica,
Dominican Republic, Ecuador, El Salvador, French Guyana, Grenada, Guadalupe, Guatemala, Haiti, Honduras, Jamaica, Martinique, Nicaragua,
Panama, Paraguay, Peru, St. Bartolome, St. Vincent &amp; Grenades, Surinam, Trinidad &amp; Tobago, Turks &amp; Caicos Islands,
Uruguay, Venezuela and Virgin Islands.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Throughout the rest of the world, we use strategic
partners and distributors for the sale of Microcyn&reg;-based products, including Bangladesh, Pakistan, India, the People&rsquo;s
Republic of China, South Korea, United Arab Emirates, Saudi Arabia, Dubai, Kuwait, Iraq, New Zealand, Singapore, Indonesia and
Malaysia.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Contract Testing</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We also operate a microbiology contract testing
laboratory division that provides consulting and laboratory services to medical companies that design and manufacture biomedical
devices and drugs, as well as testing of our products and potential products. Our testing laboratory complies with U.S. Current
Good Manufacturing Practices and Quality Systems Regulations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Manufacturing and Packaging</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We manufacture our products at our facilities
in Petaluma, California and Zapopan, Mexico.&nbsp;&nbsp;We have developed an automated manufacturing process and conduct quality
assurance testing on each production batch in accordance with current U.S., Mexican&nbsp;and international Current Good Manufacturing
Practices. Our facilities are required to meet and maintain regulatory standards applicable to the manufacture of pharmaceutical
and medical device products. Our United States facilities are certified and comply with U.S.&nbsp;Current Good Manufacturing Practices,
Quality Systems Regulations for medical devices, and International Organization for Standardization, or ISO, guidelines. Our Mexico
facility has been approved by the Ministry of Health and is also ISO certified.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 47; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->45<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our machines are subjected to a series of tests,
which is part of a validation protocol mandated by U.S., Mexican&nbsp;and international Current Good Manufacturing Practices, Quality
Systems Regulation, and ISO requirements. This validation is designed to ensure that the final product is consistently manufactured
in accordance with product specifications at all manufacturing sites. Certain materials and components used in manufacturing our
machines are proprietary to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We believe we have a sufficient number of machines
to produce an adequate amount of Microcyn&reg; to meet anticipated future requirements for at least the next two years. As we expand
into new geographic markets, we may establish additional manufacturing facilities to better serve those new markets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Intellectual Property</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our success depends in part on our ability
to obtain and maintain proprietary protection for our product technology and know-how, to operate without infringing proprietary
rights of others, and to prevent others from infringing our proprietary rights. We seek to protect our proprietary position by,
among other methods, filing, when possible, U.S.&nbsp;and foreign patent applications relating to our technology, inventions and
improvements that are important to our business. We also rely on trade secrets, know-how, continuing technological innovation,
and in-licensing opportunities to develop and maintain our proprietary position.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of June 6, 2016, we own a total of 52 issued
patents, consisting of 10 issued U.S.&nbsp;patents and 42 issued foreign patents. We also have 59 pending U.S. and foreign patent
applications. One of the U.S. applications is directed to chlorogenic acid. The remaining patent applications as well as the issued
patents are directed at our Microcyn&reg; Technology. The issued U.S. and foreign patents expire in 2022-2027.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition to our own patents and applications,
we have licensed technology developed in Japan relating to an electrolyzed water solution, methods of manufacture and electrolytic
cell designs.&nbsp;This license includes four issued Japanese patents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Although we work diligently to protect our
technology, we can make no assurances that any patent will be issued from our currently pending patent applications or from future
patent applications. The scope of any patent protection may not exclude competitors or provide competitive advantages to us, and
any of our patents may not be held valid if subsequently challenged, and others may claim rights in or ownership of our patents
and proprietary rights. Furthermore, others may develop products similar to our products and may duplicate any of our products
or design around our patents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have also filed for trademark protection
for marks used with our Microcyn&reg; products in each of the following regions: United States, Europe, Canada, Brazil, certain
countries in the Middle East and certain countries in Asia, including Japan, China, Hong Kong, the Republic of Korea, India and
Australia. In addition to patents and trademarks, we rely on trade secret and other intellectual property laws, nondisclosure agreements
and other measures to protect our intellectual property rights. We believe that in order to have a competitive advantage, we must
develop and maintain the proprietary aspects of our technologies. We require our employees, consultants and advisors to execute
confidentiality agreements in connection with their employment, consulting or advisory relationship with us. We also require our
employees, consultants and advisors with whom we expect to work on our products to agree to disclose and assign to us all inventions
made in the course of our working relationship with them, while using our property or which relate to our business. Despite any
measures taken to protect our intellectual property, unauthorized parties may attempt to copy aspects of our products or to wrongfully
obtain or use information that we regard as proprietary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Competition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Dermatology</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The dermatology market is highly competitive.
Our dermatology products face competition in the United States from several prescription products, including Novartis&rsquo; Elidel&reg;
Cream, a prescription medicine used topically on the skin to treat eczema, which is also called atopic dermatitis, and Astellas&rsquo;
Protopic&reg;, a prescription ointment used to treat moderate to severe eczema. In addition, corticosteroids are commonly used
to treat inflammation and itch on atopic dermatitis patients as the standard of care. Many doctors and patients will tend to use
steroids for a limited time period to manage flare-ups due to their side effects. Since atopic dermatitis is a chronic disease,
a safe product such as Alevicyn&trade;, which reduces the itching, can be used as a maintenance product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 48; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->46<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Advanced Tissue Care Markets</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Competition in the markets for advanced tissue
care is intense. We compete with a number of large, well-established and well-funded companies that sell a broad range of wound
and tissue care products, including topical anti-infectives and antibiotics, as well as some advanced wound technologies, such
as skin substitutes, growth factors and sophisticated delayed release silver-based dressings. We believe the principal competitive
factors in our target market are related to improved patient outcomes, such as shortened time in the hospital, accelerated healing
time, lack of adverse events, safety of products, ease-of-use, stability, pathogen, or disease causing micro-organism, killing
and cost effectiveness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our products compete with a variety of products
used for wound cleaning, debriding and moistening, including sterile saline and chlorhexidine-based products. They also compete
with a large number of prescription and over-the-counter products for the prevention and treatment of infections, including topical
anti-infectives, such as Betadine, silver sulfadiazine, hydrogen peroxide, Dakin&rsquo;s solution and hypochlorous acid, and topical
antibiotics, such as Neosporin, Mupirocin and Bacitracin. Currently, no single anti-infective product dominates the chronic or
acute wound markets because many of the products have serious limitations or tend to inhibit the wound healing process.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our products can replace the use of saline
for debriding and moistening a dressing and can be used as a complementary product with many advanced tissue care technologies,
such as the Vacuum-Assisted Closure, or V.A.C. Therapy System from Kinetic Concepts Inc., skin substitute products from Smith&nbsp;&amp;
Nephew, Advanced BioHealing, now called Shire Regenerative Medicine, Integra Life Sciences, Life Cell, Organogenesis and Ortec
International, and ultrasound products from Celleration. We believe that Microcyn&reg; Technology can enhance the effectiveness
of many of these advanced tissue care technologies. Because Microcyn&reg; is competitive with some of the large wound care companies&rsquo;
products and complementary to others, we may compete with such companies in some product lines and complement such companies in
other product lines.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Factors Affecting Our Competitive Position</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">While many companies are able to produce oxychlorine
formulations, their products, unlike ours, typically become unstable after a relatively short period of time or use very large
ranges of effectiveness to improve their shelf lives. We believe Microcyn&reg; is a stable anti-infective therapeutic available,
or soon to be available, throughout many parts of the world that treats infection while also enhancing wound healing through increased
blood flow to the wound bed and reduction of inflammation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Some of our competitors in the dermatology,
advanced tissue care markets and animal healthcare enjoy several competitive advantages, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">significantly greater name recognition;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">established relationships with healthcare professionals, patients and third-party payors;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">established distribution networks;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">additional product lines and the ability to offer rebates or bundle products to offer discounts or incentives;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">greater experience in conducting research and development, manufacturing, obtaining regulatory approval for products and marketing; and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">greater financial and human resources for product development, sales and marketing and patient support.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>


<!-- Field: Page; Sequence: 49; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->47<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Government Regulation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Government authorities in the United States
at the federal, state and local levels and foreign countries extensively regulate, among other things, the research, development,
testing, manufacture, labeling, promotion, advertising, distribution, sampling, marketing, and import and export of pharmaceutical
products, biologics and medical devices. All of our products in development will require regulatory approval or clearance by government
agencies prior to commercialization. In particular, human therapeutic products are subject to rigorous pre-clinical and clinical
trials and other approval procedures of the FDA and similar regulatory authorities in foreign countries. Various federal, state,
local and foreign statutes and regulations also govern testing, manufacturing, safety, labeling, storage, distribution and record-keeping
related to such products and their marketing. The process of obtaining these approvals and clearances, and the subsequent process
of maintaining substantial compliance with appropriate federal, state, local, and foreign statutes and regulations, require the
expenditure of substantial time and financial resources. In addition, statutes, rules, regulations and policies may change and
new legislation or regulations may be issued that could delay such approvals.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Medical Device Regulation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">To date, we have received sixteen 510(k) clearances
for use of our Microcyn&reg; technology products as medical devices in tissue care management, such as cleaning, debridement, lubricating,
moistening and dressing, including for acute and chronic wounds, and in dermatology applications. Any future product candidates
or new applications using Microcyn&reg; that are classified as medical devices will require clearance by the FDA.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Medical devices, such as Microcyn&reg; Wound
Care, are subject to FDA clearance and extensive regulation under the Federal Food Drug and Cosmetic Act. Under the Federal Food
Drug and Cosmetic Act, medical devices are classified into one of three classes: Class I, Class II or Class III. The classification
of a device into one of these three classes generally depends on the degree of risk associated with the medical device and the
extent of control needed to ensure safety and effectiveness. Devices may also be designated unclassified. Unclassified devices
are legally marketed pre-amendment devices for which a classification regulation has yet to be finalized and for which a pre-market
approval is not required.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Class I devices are devices for which safety
and effectiveness can be assured by adherence to a set of general controls. These general controls include compliance with the
applicable portions of the FDA&rsquo;s Quality System Regulation, which sets forth good manufacturing practice requirements; facility
registration, device listing and product reporting of adverse medical events; truthful and non-misleading labeling; and promotion
of the device only for its cleared or approved intended uses. Class&nbsp;II devices are also subject to these general controls,
and any other special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. Review and
clearance by the FDA for these devices is typically accomplished through the 510(k) pre-market notification procedure. When 510(k)
clearance is sought, a sponsor must submit a pre-market notification demonstrating that the proposed device is substantially equivalent
to a legally marketed device. If the FDA agrees that the proposed device is substantially equivalent to the predicate device, then
510(k) clearance to market will be granted. After a device receives 510(k) clearance, any modification that could significantly
affect its safety or effectiveness, or that would constitute a major change in its intended use, requires a new 510(k) clearance
or could require a pre-market approval.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Clinical trials are almost always required
to support a pre-market approval application and are sometimes required for a 510(k) pre-market notification. These trials generally
require submission of an application for an investigational device exemption. An investigational device exemption must be supported
by pre-clinical data, such as animal and laboratory testing results, which show that the device is safe to test in humans and that
the study protocols are scientifically sound. The FDA must approve an investigational device exemption, in advance, for a specified
number of patients, unless the product is deemed a non-significant risk device and is eligible for more abbreviated investigational
device exemption requirements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Both before and after a medical device is commercially
distributed, manufacturers and marketers of the device have ongoing responsibilities under FDA regulations. The FDA reviews design
and manufacturing practices, labeling and record keeping, and manufacturers&rsquo; required reports of adverse experiences and
other information to identify potential problems with marketed medical devices. Device manufacturers are subject to periodic and
unannounced inspection by the FDA for compliance with the Quality System Regulation, which sets forth the Current Good Manufacturing
Practice requirements that govern the methods used in, and the facilities and controls used for, the design, manufacture, packaging,
servicing, labeling, storage, installation and distribution of all finished medical devices intended for human use.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 50; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->48<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">FDA regulations prohibit the advertising and
promotion of a medical device for any use outside the scope of a 510(k) clearance or pre-market approval or for unsupported safety
or effectiveness claims. Although the FDA does not regulate physicians&rsquo; practice of medicine, the FDA does regulate manufacturer
communications with respect to off-label use.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">If the FDA finds that a manufacturer has failed
to comply with FDA laws and regulations or that a medical device is ineffective or poses an unreasonable health risk, it can institute
or seek a wide variety of enforcement actions and remedies, ranging from a public warning letter to more severe actions such as:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">imposing fines, injunctions and civil penalties;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">requiring a recall or seizure of products;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">implementing operating restrictions, which can include a partial suspension or total shutdown of production;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">refusing requests for 510(k) clearance or pre-market approval of new products;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">withdrawing 510(k) clearance or pre-market approval approvals already granted;&nbsp;and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">criminal prosecution.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The FDA also has the authority to require a
company to repair, replace, or refund the cost of any medical device.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The FDA also administers certain controls over
the export of medical devices from the United States, as international sales of medical devices that have not received FDA clearance
are subject to FDA export requirements. Additionally, each foreign country subjects such medical devices to its own regulatory
requirements. In the European Union, there is a single regulatory approval process and approval is represented by the presence
of a CE Mark.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Other Regulation in the United States</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>The Physician Payments Sunshine Act</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Physician Payments Sunshine Act signed
into law in 2010 as part of the Affordable Care Act requires manufacturers of medical devices, drugs, biologicals, and medical
supplies to track and report certain payments made to and transfers of value provided to physicians and teaching hospitals as well
as to report certain ownership and investment interests held by physicians and their immediate family members. These manufacturers
must report annually to the Center for Medicare &amp; Medicaid Services any direct or indirect payments and transfers of value
of $10 or more, or annual aggregate of $100 or more, made to physicians or to a third party at the request of or on behalf of a
physician, including dentists. Payment includes: consulting fees, compensation for services other than consulting, honoraria, gifts,
entertainment, food, travel (including the specified destinations), education, research, charitable contribution, royalty or license,
current or prospective ownership or investment interest, direct compensation for serving as faculty or as a speaker for a medical
education program, grants, any other nature of the payment, or other transfer of value. Manufacturers face monetary penalties for
non-compliance. Certain payments related to research must be reported separately. Product samples intended for patient use need
not be reported.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Health Care Coverage and Reimbursement by
Third-Party Payors</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Commercial success in marketing and selling
our products depends, in part, on the availability of adequate coverage and reimbursement from third-party health care payors,
such as government and private health insurers and managed care organizations. Third-party payors are increasingly challenging
the pricing of medical products and services. Government and private sector initiatives to limit the growth of health care costs,
including price regulation, competitive pricing, and managed-care arrangements, are continuing in many countries where we do business,
including the United States. These changes are causing the marketplace to be more cost-conscious and focused on the delivery of
more cost-effective medical products. Government programs, including Medicare and Medicaid, private health care insurance companies,
and managed-care plans control costs by limiting coverage and the amount of reimbursement for particular procedures or treatments.
This has created an increasing level of price sensitivity among customers for our products. Some third-party payors also require
that a favorable coverage determination be made for new or innovative medical devices or therapies before they will provide reimbursement
of those medical devices or therapies. Even though a new medical product may have been cleared or approved for commercial distribution,
we may find limited demand for the product until adequate coverage and reimbursement have been obtained from governmental and other
third-party payors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 51; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->49<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Fraud and Abuse Laws</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In the United States, we are subject to various
federal and state laws pertaining to healthcare fraud and abuse, which, among other things, prohibit the offer or acceptance of
remuneration intended to induce or in exchange for the purchase of products or services reimbursed under a federal healthcare program
and the submission of false or fraudulent claims with the government. These laws include the federal Anti-Kickback Statute, the
False Claims Act and comparable state laws. These laws regulate the activities of entities involved in the healthcare industry,
such as us, by limiting the kinds of financial arrangements such entities may have with healthcare providers who use or recommend
the use of medical products, including, for example, sales and marketing programs, advisory boards and research and educational
grants. In addition, in order to ensure that healthcare entities comply with healthcare laws, the Office of Inspector General of
the U.S.Department of Health and Human Services recommends that healthcare entities institute effective compliance programs.
To assist in the development of effective compliance programs, the Office of Inspector General has issued model Compliance Program
Guidance, materials for a variety of healthcare entities which, among other things, identify practices to avoid that may implicate
the federal Anti-Kickback Statute and other relevant laws and describes elements of an effective compliance program. While compliance
with the Compliance Program Guidance materials is voluntary, a California law requires pharmaceutical and devices manufacturers
to initiate compliance programs that incorporate the Compliance Program Guidance and the July 2002 Pharmaceuticals Research and
Manufacturers of America Code on Interactions with Healthcare Professionals.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Due to the scope and breadth of the provisions
of some of these laws, it is possible that some of our practices might be challenged by the government under one or more of these
laws in the future. Violations of these laws, which are discussed more fully below, can lead to civil and criminal penalties, damages,
imprisonment, fines, exclusion from participation in Medicare, Medicaid and other federal health care programs, and the curtailment
or restructuring of our operations. Any such violations could have a material adverse effect on our business, financial condition,
results of operations or cash flows.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Anti-Kickback Laws</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our operations are subject to federal and state
anti-kickback laws. The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, receiving, offering
or providing remuneration directly or indirectly to induce either the referral of an individual for a good or service reimbursed
under a federal healthcare program, or the furnishing, recommending, or arranging of a good or service, for which payment may be
made under a federal healthcare program, such as Medicare or Medicaid. The definition of &ldquo;remuneration&rdquo; has been broadly
interpreted to include anything of value, including such items as gifts, discounts, the furnishing of supplies or equipment, waiver
of co-payments, and providing anything at less than its fair market value. Because the Anti-Kickback Statute makes illegal a wide
variety of common, even beneficial, business arrangements, the Office of Inspector General was tasked with issuing regulations,
commonly known as &ldquo;safe harbors,&rdquo; that describe arrangements where the risk of illegal remuneration is minimal. As
long as all of the requirements of a particular safe harbor are strictly met, the entity engaging in that activity will not be
prosecuted under the federal Anti-Kickback Statute. The failure of a transaction or arrangement to fit precisely within one or
more safe harbors does not necessarily mean that it is illegal or that prosecution will be pursued. However, business arrangements
that do not fully satisfy an applicable safe harbor may result in increased scrutiny by government enforcement authorities, such
as the Office of Inspector General. Our agreements to pay compensation to our advisory board members and physicians who provide
other services for us may be subject to challenge to the extent they do not fall within relevant safe harbors under state and federal
anti-kickback laws. In addition, many states have adopted laws similar to the federal Anti-Kickback Statute, which apply to the
referral of patients for health care services reimbursed by Medicaid, and some have adopted such laws with respect to private insurance.
Violations of the Anti-Kickback Statute are subject to significant fines and penalties and may lead to a company being excluded
from participating in federal health care programs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 52; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->50<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>False Claims Laws</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The federal False Claims Act prohibits knowingly
filing a false claim, knowingly causing the filing of a false claim, or knowingly using false statements to obtain payment from
the federal government. Under the False Claims Act, such suits are known as &ldquo;qui tam&rdquo; actions. Individuals may file
suit on behalf of the government and share in any amounts received by the government pursuant to a settlement. In addition, certain
states have enacted laws modeled after the federal False Claims Act under the Deficit Reduction Act of 2005, where the federal
government created financial incentives for states to enact false claims laws consistent with the federal False Claims Act. As
more states enact such laws, we expect the number of qui tam lawsuits to increase. Qui tam actions have increased significantly
in recent years, causing greater numbers of healthcare companies to have to defend false claims actions, pay fines or be excluded
from Medicare, Medicaid or other federal or state government healthcare programs as a result of investigations arising out of such
actions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>HIPAA</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Two federal crimes were created under the Health
Insurance Portability and Accountability Act of 1996, or HIPAA: healthcare fraud and false statements relating to healthcare matters.
The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including
private payors. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material
fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare
benefits, items or services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Health Information Privacy and Security</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Individually, identifiable health information
is subject to an array of federal and state regulation. Federal rules promulgated pursuant to HIPAA regulate the use and disclosure
of health information by &ldquo;covered entities.&rdquo; Covered entities include individual and institutional health care providers
from which we may receive individually identifiable health information. These regulations govern, among other things, the use and
disclosure of health information for research purposes, and require the covered entity to obtain the written authorization of the
individual before using or disclosing health information for research. Failure of the covered entity to obtain such authorization
could subject the covered entity to civil and criminal penalties. We may experience delays and complex negotiations as we deal
with each entity&rsquo;s differing interpretation of the regulations and what is required for compliance. Also, where our customers
or contractors are covered entities, including hospitals, universities, physicians or clinics, we may be required by the HIPAA
regulations to enter into &ldquo;business associate&rdquo; agreements that subject us to certain privacy and security requirements.
In addition, many states have laws that apply to the use and disclosure of health information, and these laws could also affect
the manner in which we conduct our research and other aspects of our business. Such state laws are not preempted by the federal
privacy law when such laws afford greater privacy protection to the individual than the federal law. While activities to assure
compliance with health information privacy laws are a routine business practice, we are unable to predict the extent to which our
resources may be diverted in the event of an investigation or enforcement action with respect to such laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Foreign Regulation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Whether or not we obtain FDA approval for a
product, we must obtain approval of a product by the applicable regulatory authorities of foreign countries before we can commence
clinical trials or marketing of the product in those countries. The approval process varies from country to country, and the time
may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product
licensing, pricing and reimbursement also vary greatly from country to country. Although governed by the applicable country, clinical
trials conducted outside of the United States typically are administered under a three-phase sequential process similar to that
discussed above for medical devices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>European Union Regulation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Medical Device Regulation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our products are classified as medical devices
in the European Union. In order to sell our medical device products within the European Union, we are required to comply with the
requirements of the Medical Devices Directive, and its national implementations, including affixing CE markings on our products.
The CE marking indicates a product&rsquo;s compliance with EU legislation and so enables the sale of products throughout the European
Economic Area (EEA, the 28 Member States of the EU and European Free Trade Association (EFTA) countries Iceland, Norway, Liechtenstein).
In order to comply with the Medical Devices Directive, we must meet certain requirements relating to the safety and performance
of our products and, prior to marketing our products, we must successfully undergo verification of our products&rsquo; regulatory
compliance, or conformity assessment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 53; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->51<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Medical devices are divided into three regulatory
classes: Class&nbsp;I, Class&nbsp;IIB and Class&nbsp;III. The nature of the conformity assessment procedures depends on the regulatory
class of the product. In order to comply with the examination, we completed, among other things, a risk analysis and presented
clinical data, which demonstrated that our products met the performance specifications claimed by us, provided sufficient evidence
of adequate assessment of unwanted side effects and demonstrated that the benefits to the patient outweigh the risks associated
with the device. We are subject to continued supervision and are required to report any serious adverse incidents to the appropriate
authorities. We are also required to comply with additional national requirements that are beyond the scope of the Medical Devices
Directive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We received a CE certificate for 25 of our
Class IIB medical devices, which allows us to affix CE markings on these products and sell them in Europe. The CE certificate is
valid through December 2018. Currently, the European Commission and the European Parliament are discussing changes to the Medical
Devices Directive which could include stricter requirements for obtaining CE markings or continued compliance. We may not be able
to maintain the requirements established for CE markings for any or all of our products or be able to produce these products in
a timely and profitable manner while complying with the requirements of the Medical Devices Directive and other regulatory requirements.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Marketing Authorizations for Drugs</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In order to obtain marketing approval of any
of our drug products in Europe, we must submit for review an application similar to a U.S.&nbsp;new drug application to the relevant
authority. In contrast to the United States, where the FDA is the only authority that administers and approves new drug applications,
in Europe there are multiple authorities that administer and approve these applications. Marketing Authorizations in Europe expire
after five years but may be renewed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We believe that any drug candidate will be
reviewed by the Committee for Medicinal Products for Human Use, on behalf of the European Medicines Agency. Based upon the review
of the Committee for Medicinal Products for Human Use, the European Medicines Agency provides an opinion to the European Commission
on the safety, quality and efficacy of the drug. The decision to grant or refuse an authorization is made by the European Commission.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Approval of Marketing Applications can take
several months to several years, or may be denied. This approval process can be affected by many of the same factors relating to
safety, quality and efficacy as in the approval process for new drug applications in the United States. As in the United States,
European drug regulatory authorities can require us to perform additional non-clinical studies and clinical trials. The need for
such studies or trials, if imposed, may delay marketing approval and involve unanticipated costs. Inspection of clinical investigation
sites by a competent authority may also be required as part of the regulatory approval procedure. In addition, as a condition of
marketing approval, regulatory agencies in Europe may require post-marketing surveillance to monitor for adverse effects, or other
additional studies may be required as deemed appropriate. The terms of any approval, including labeling content, may be more restrictive
than expected and could affect the marketability of a product. In addition, after approval for the initial indication, further
clinical studies are usually necessary to gain approval for any additional indications.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>European Good Manufacturing Process</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In the European Union, the manufacture of pharmaceutical
products and clinical trial supplies is subject to good manufacturing practice as set forth in the relevant laws and guidelines.
Compliance with good manufacturing practice is generally assessed by the competent regulatory authorities. They may conduct inspections
of relevant facilities, and review manufacturing procedures, operating systems and personnel qualifications. In addition to obtaining
approval for each product, in many cases each drug manufacturing facility must be approved. Further inspections may occur over
the life of the product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Violation of these regulations may result in
the revocation of the registrations or approvals, and economic fines. In some cases, such violations may constitute criminal actions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition, regulatory approval of prices
is required in most countries other than the United States, which could result in lengthy negotiations delaying our ability to
commercialize our products. We face the risk that the prices which result from the regulatory approval process would be insufficient
to generate an acceptable return.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 54; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->52<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Research and Development</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Research and development expense consists primarily
of personnel expenses, clinical and regulatory services and supplies. For the years ended March 31, 2016 and 2015, research and
development expense amounted to $1,806,000 and $1,533,000, respectively. None of these expenses were borne by our customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Significant Customers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We rely on certain key customers for a significant
portion of our revenues. At March 31, 2016, one customer represented 33% of the net accounts receivable balance. At March 31, 2016,
one customer represented 40%, one customer represented 15%, one customer represented 14% and two customers each represented 12%
of net revenues. At March 31, 2015, one customer represented 56%, and one customer represented 14% of the net accounts receivable
balance. During the year ended March&nbsp;31, 2015, one customer represented 47% of net revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the three months ended December 31, 2016,
one customer represented 22%, one customer represented 16%, one customer represented 13% and one customer represented 10% of net
revenue. For the three months ended December 31, 2015, one customer represented 33% and one customer represented 10% of net revenue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the nine months ended December 31, 2016,
one customer represented 27% of net revenue. For the nine months ended December 31, 2015, one customer represented 35% of net revenue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2016, one customer represented
30%, one customer represented 26%, one customer represented 23%, one customer represented 16% and one customer represented 13%
of the net accounts receivable balance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Our Employees</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of March 1, 2017, we employed a&nbsp;total
of 77 employees in the United States and 1.5 full-time equivalent employees in Europe. Additionally, we had 136 employees in Mexico,
all of which were contracted through an employment agency. We are not a party to any collective bargaining agreements. We believe
our relations with our employees are good.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1.25pt; text-align: justify; text-indent: -0.5pt"><B>Description
of Property </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We currently lease the following material properties:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: bottom; width: 33%; border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt"><B>Location</B></FONT></TD>
    <TD STYLE="vertical-align: top; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 13%; border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt"><B>Rent per month</B></FONT></TD>
    <TD STYLE="vertical-align: top; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 52%; border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt"><B>Purpose</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">1129 N. McDowell Blvd., Petaluma, CA 94954, USA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">USD 11,072</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Principal executive office, also used for research and manufacturing</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">454 North 34th Street, Seattle, Wash. 98103, USA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">USD 2,700</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Shared office and laboratory space</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Suite 130, First Floor, 2500 York Road, Jamison, PA 18929</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">USD 2,126</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Office</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Industria Vidriera 81, Zapopan Industrial Norte, Zapopan, Jalisco, 45132, Mexico</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">MXN 121,395</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Office, manufacturing, storage</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Industria Maderera 124 &amp; 106 &amp; 815 Zapopan Industrial Norte, Zapopan, Jalisco, 45132, Mexico</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">MXN 124,500</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Storage</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Nusterweg 123, 6136 ST Sittard (gemeente Sittard, sectie K, nummers 2765 en 2778) Herten, the Netherlands</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Euro 6,250</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Office</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As we expand, we may need to establish manufacturing
facilities in other countries. We believe that our properties will be adequate to meet our needs for at least the next 12 months.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white"><B>&nbsp;</B></P>


<!-- Field: Page; Sequence: 55; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->53<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1.55pt; text-align: justify; text-indent: -0.5pt"><B>Legal Proceedings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On occasion, we may be involved in legal matters
arising in the ordinary course of our business including matters involving proprietary technology. While management believes that
such matters are currently insignificant, matters arising in the ordinary course of business for which we are or could become involved
in litigation may have a material adverse effect on our business, financial condition or results of comprehensive loss.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 1.7pt; text-align: center; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><A NAME="a11"></A> <FONT STYLE="text-transform: uppercase"><B>MANAGEMENT</B></FONT></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 1.7pt; text-align: center; text-indent: -0.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.15pt"></TD><TD STYLE="width: 0.5pt"><B>Directors</B></TD><TD STYLE="text-align: justify"></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.65pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At our 2008 Annual Meeting of Stockholders,
our stockholders approved an amendment to our Restated Certificate of Incorporation, as amended, which provided that directors
are classified into three classes, as nearly equal in number as possible, with each class serving for a staggered three-year term.
Our Board currently consists of five directors:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 7%; border: black 1pt solid; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 15%; border-top: black 1pt solid; border-right: black 1pt solid; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Name</B></FONT></TD>
    <TD STYLE="width: 5%; border-top: black 1pt solid; border-right: black 1pt solid; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Age</B></FONT></TD>
    <TD STYLE="width: 51%; border-top: black 1pt solid; border-right: black 1pt solid; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Position with the Company</B></FONT></TD>
    <TD STYLE="width: 12%; border-top: black 1pt solid; border-right: black 1pt solid; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Director Since</B></FONT></TD>
    <TD STYLE="width: 10%; border-top: black 1pt solid; border-right: black 1pt solid; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Term Expires</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Class I</B></FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Sharon Barbari</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">62 </FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Class&nbsp;I Director</FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">03/2014</FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2018</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Russell Harrison</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">71 </FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Class I Director</FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">02/2014</FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2018</FONT></TD></TR>
<TR>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Class II</B></FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Jay Birnbaum</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">71</FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Class&nbsp;II Director</FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">04/2007</FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2019</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Jim Schutz</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">53 </FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Chief Executive Officer and Class II Director</FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">05/2004</FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2019</FONT></TD></TR>
<TR>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Class III</B></FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Jerry McLaughlin</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">68 </FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Class&nbsp;III Director</FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">03/2013</FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2017</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The biographies of our directors and certain
information regarding each director&rsquo;s experience, attributes, skills and/or qualifications that led to the conclusion that
the director should be serving as a director of Sonoma are stated below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Sharon Barbari</I>: Ms. Barbari has served
as Executive Vice President of Finance and Chief Financial Officer of Cytokinetics Inc. since July 2009. She served as Senior Vice
President of Finance and Chief Financial Officer from September 2004 through June 2009. From September 2002 to August 2004, Ms.
Barbari served as Chief Financial Officer and Senior Vice President of Finance and Administration of InterMune, Inc., a biopharmaceutical
company. From January 1998 to June 2002, she served at Gilead Sciences, Inc., a biopharmaceutical company, and held several positions
of increasing responsibility including most recently as its Vice President and Chief Financial Officer. From 1996 to 1998, Ms.
Barbari served as Vice President of Strategic Planning at Foote, Cone &amp; Belding Healthcare in San Francisco, an international
advertising and marketing firm. From 1972 to 1995, she was employed by Syntex Corporation where she held various management positions
in corporate finance, financial planning, marketing and commercial planning.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Russell Harrison</I>: Mr. Harrison has served
on our Board of Directors since February 2014. Mr. Harrison is the founding principal of The Leadership Group, LLC, a firm specializing
in strategic change and executive coaching for U.S. and international companies, a position he has held since January 2012. From
2006 to 2012, he was employed by CoolSystems, Inc. d/b/a Game Ready, Inc. and was appointed as its President and Chief Executive
Officer in 2007. Mr. Harrison has also served in the role of Chief Executive Officer for a number of publicly traded and private
technology businesses in both the information technology and medical device technology sectors. From 1995 to 1997, he served as
Chief Information Officer at SITA Telecommunications Holdings in Paris, where he led a team responsible for technology spanning
more than 200 countries and territories. From 1991 to 1993, Mr. Harrison served as the first Chief Information Officer for McKesson
Corporation, responsible for all computer technology-related activities. He also served as a Captain in the United States Marine
Corps.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Jay Birnbaum</I>: Dr. Birnbaum is a pharmacologist
and since 1999, has been a consultant to pharmaceutical companies in his area of expertise. He previously served as Vice President
of Global Project Management at Novartis/Sandoz Pharmaceuticals Corporation, where he had responsibility for strategic planning
and development of the company&rsquo;s dermatology portfolio. Dr. Birnbaum is also a co-founder and former Chief Medical Officer
of Kythera Biopharmaceuticals, and has served on the board of directors of Excaliard Pharmaceuticals (a company recently acquired
by Pfizer) and on the scientific advisory boards of several companies. During 2015, Dr. Birnbaum co-founded Hallux, Inc. and serves
as Hallux&rsquo; Chief Scientific Officer and member of the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>


<!-- Field: Page; Sequence: 56; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->54<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><A NAME="a30"></A><I>Jim Schutz</I>: Mr. Schutz was appointed
our President and Chief Executive Officer on February 4, 2013. Prior to this appointment, he most recently held the position of
our Chief Operating Officer and General Counsel, and has served in various other capacities as an executive officer of our Company
since August 2003. From August 2001 to August 2003, Mr. Schutz served as General Counsel at Jomed (formerly EndoSonic Corp.), an
international medical device company. From 1999 to July 2001, Mr. Schutz served as in-house counsel at Urban Media Communications
Corporation, an internet/telecom company based in Palo Alto, California.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Jerry McLaughlin</I>: Mr. McLaughlin
served as Interim Chief Executive Officer of Applied BioCode, Inc. from November 2011 to April 2013. In April 2011, he also founded,
and until April 2016, served as Chairman of the Board and Chief Executive Officer, of DataStream Medical Imaging Systems, Inc.,
a start-up to develop diagnostic imaging software applications that work in conjunction with existing digital radiology platforms.
He previously served as President of DataFlow Information Systems, from July 2007 to December 2011, and President and Chief Executive
Officer of CompuMed, Inc. from May 2002 to June 2007.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Committees of the Board of Directors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">Our Board
of Directors has appointed an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. The
Board of Directors has determined that each director who serves on these committees is &ldquo;independent,&rdquo; as that term
is defined by the NASDAQ Listing Rules and rules of the SEC. The Board of Directors has adopted written charters for its Audit
Committee, its Compensation Committee and its Nominating and Corporate Governance Committee. Copies of these charters are available
on our website at http://ir.sonomapharma.com/governance.cfm. In addition to the number of meetings referenced below, the Committees
also took actions by unanimous written consent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">Information
about each of our committees is stated below</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR>
    <TD STYLE="width: 25%; border: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Name of Committee Member</B></FONT></TD>
    <TD STYLE="width: 25%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Audit</B></FONT></TD>
    <TD STYLE="width: 25%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Compensation</B></FONT></TD>
    <TD STYLE="width: 25%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Nominating and <BR>
Corporate Governance</B></FONT></TD></TR>
<TR STYLE="background-color: #D0CECE">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">Sharon Barbari</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">C</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center">&nbsp;</TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">M</FONT></TD></TR>
<TR>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">Jerry McLaughlin</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center">&nbsp;</TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">C</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center">&nbsp;</TD></TR>
<TR STYLE="background-color: #D0CECE">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">Russell Harrison</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">M</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">M</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">C</FONT></TD></TR>
<TR>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">Jay Birnbaum</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">M</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center">&nbsp;</TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.7pt; text-align: justify; text-indent: 35.3pt">C = Committee
Chair</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: 35.5pt">M = Member</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 4.3pt 0 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Director Independence</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We determine independence using the definitions
set forth in the NASDAQ Listing Rules and the rules under the Securities Exchange Act of 1934. The Board has determined that the
following directors are independent:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font-size: 10pt">Sharon Barbari</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font-size: 10pt">Russell Harrison</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font-size: 10pt">Jerry McLaughlin; and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font-size: 10pt">Jay Birnbaum.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 57; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->55<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">It is our policy that all employees, officers
and directors must avoid any activity that is, or has the appearance of, conflicting with the interests of our Company. This policy
is included in our Code of Business Conduct, and our Board formally adopted a Related Party Transaction Policy and Procedures in
July 2007 for the approval of interested transactions with persons who are Board members or nominees, executive officers, holders
of 5% of our common stock, or family members of any of the foregoing. The Related Party Transaction Policy and Procedures are administered
by our Audit Committee. We conduct a review of all related party transactions for potential conflict of interest situations on
an ongoing basis and all such transactions relating to executive officers and directors must be approved by the Audit Committee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Director Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table sets forth the amounts
and the value of compensation earned or paid to our directors for their service in fiscal year 2016. All share numbers have been
adjusted for the 1-for-5 reverse stock split effective June 24, 2016.<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="background-color: #D9D9D9">
    <TD STYLE="width: 22%; border: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Name of Director</B></FONT></TD>
    <TD STYLE="width: 15%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Fees Earned or<BR>
 Paid in Cash </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>($) (1)</B></P></TD>
    <TD STYLE="width: 15%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Stock Awards </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>($) (2) (3) (4)</B></P></TD>
    <TD STYLE="width: 16%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Option Awards ($)<BR>
 (4) (5)</B></FONT></TD>
    <TD STYLE="vertical-align: top; width: 16%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>All Other<BR>
 Compensation </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>($) (6)</B></P></TD>
    <TD STYLE="width: 16%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total ($)</B></FONT></TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Jim Schutz (7)</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD></TR>
<TR STYLE="background-color: #D9D9D9">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Russell Harrison (8)</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">34,063</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">21,010</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">14,942</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">8,405</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">78,420</FONT></TD></TR>
<TR>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Sharon Barbari (9)</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">34,063</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">19,761</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">13,053</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">7,905</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">74,782</FONT></TD></TR>
<TR STYLE="background-color: #D9D9D9">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Jay Birnbaum (10)</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">29,688</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">19,256</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">12,297</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">7,705</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">68,946</FONT></TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Jerry McLaughlin (11)</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">32,813</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">24,258</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">19,863</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">9,705</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">86,639</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(1)</TD><TD STYLE="text-align: justify; padding-right: 0.3in">The table omits the columns, non-equity incentive plan compensation, change
in pension value and nonqualified deferred compensation earnings because our directors did not receive any of these compensation
items in fiscal year 2016.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3in 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(2)</TD><TD STYLE="text-align: justify; padding-right: 0.3in">Represents the aggregate grant date fair value of stock awards granted during
the fiscal year ended March 31, 2016, as computed in accordance with FASB ASC Topic 718, Compensation &ndash; Stock Compensation.
The fair value of each stock award is determined on the date of grant by taking the number of shares of common stock granted multiplied
by the closing price of the common stock on the NASDAQ Capital Market on the day of grant.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3in 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(3)</TD><TD STYLE="text-align: justify; padding-right: 0.3in">Pursuant to our non-employee director compensation plan, on the last business
day of the month of February, each non-employee director is automatically granted 2,250 shares of our common stock, provided that
no annual grant is granted to a non-employee director in the same calendar year that such person received his or her initial grant.
The annual stock grants are subject to a 40% tax gross up granted as an additional cash payment equal to 0.40 multiplied by the
number of shares of common stock granted multiplied by the closing price of the common stock on the NASDAQ Capital Market on the
day of the grant.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3in 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(4)</TD><TD STYLE="text-align: justify; padding-right: 0.3in">Pursuant to our non-employee director compensation plan effective March 26,
2014, as amended, non-employee directors may elect to receive any fees, except for Audit Committee fees, in one of three ways at
the director&rsquo;s election: (1) in cash; (2) in options, or (3) as a stock grant. Options to purchase shares of our common stock
vest immediately and the exercise price for such options shall be the closing price of our stock on the date such options are granted.
Stock grants vest immediately and the actual number of shares underlying the stock grant is determined by dividing the amount of
the award due in cash by the closing price of our stock on the NASDAQ Capital Market on the day of the grant. All of our directors
elected to receive a portion of their retainer in stock or stock options for the year ended March 31, 2016, as indicated in the
table below. The table includes options granted on June 1, 2015, for services as a director during the period of January 1 to March
31, 2015.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 58; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->56<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="background-color: #D9D9D9">
    <TD STYLE="width: 42%; border: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Name of Director</B></FONT></TD>
    <TD STYLE="width: 19%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Amount in $</B></FONT></TD>
    <TD STYLE="width: 19%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: center; text-indent: -0.5in"><B>Number of
        Shares</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: center; text-indent: -0.5in"><B>received in
        Lieu of</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: center; text-indent: -0.5in"><B>Cash</B></P></TD>
    <TD STYLE="width: 20%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: center; text-indent: -0.5in"><B>Number of
        Options</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: center; text-indent: -0.5in"><B>received in
        Lieu of</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: center; text-indent: -0.5in"><B>Cash</B></P></TD></TR>
<TR>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Russell Harrison</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">24,688</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2,015</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3,891</FONT></TD></TR>
<TR STYLE="background-color: #D9D9D9">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Sharon Barbari</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">21,563</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1,760</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3,399</FONT></TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Jay Birnbaum</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">20,313</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1,657</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3,202</FONT></TD></TR>
<TR STYLE="background-color: #D9D9D9">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Jerry McLaughlin</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">32,813</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2,678</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5,173</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 22.5pt 0 0.5in; text-align: justify; text-indent: 0in">As of March
31, 2016, our directors had the following aggregate numbers of granted and outstanding options, respectively: Mr. Schutz &ndash;
48,481, Mr. Harrison &ndash; 17,893, Ms. Barbari &ndash; 16,192, Mr. Birnbaum &ndash; 34,798, and Mr. McLaughlin &ndash; 29,224.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(5)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">Represents the aggregate grant date fair value of stock option awards granted
during the fiscal year ended March 31, 2016, as computed in accordance with FASB ASC Topic 718, Compensation &mdash; Stock Compensation.
The fair value of each stock option award is estimated for the fiscal year ended March 31, 2016, on the date of grant using the
Black-Scholes option valuation model. A discussion of the assumptions used in calculating the amounts in this column may be found
in Note 14 to our audited consolidated financial statements for the year ended March 31, 2016, included in our Annual Report on
Form 10-K filed with the SEC on June 21, 2016. These amounts do not represent the actual amounts paid to or realized by the directors
during the fiscal year ended March 31, 2016.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(6)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">Pursuant to our non-employee director compensation program, all elective
and automatic stock grants are subject to a 40% tax gross up granted as an additional cash payment equal to 0.40 multiplied by
the number of shares of common stock granted multiplied by the closing price of the common stock on the NASDAQ Capital Market on
the day of the grant.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(7)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">As a Company employee, Mr. Schutz did not receive compensation for his
service as a director during fiscal year ended March 31, 2016.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(8)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">For the fiscal year ended in March 31, 2016, Mr. Harrison earned $47,000
for his services as a director. Of this aggregate amount of $47,000, Mr. Harrison received $32,500 as his annual retainer for serving
on the Board, $7,500 for his services as a member of the Audit Committee, $2,000, for his services as a member of the Compensation
Committee and $5,000, for his services as the chairperson of the Nominations and Corporate Governance Committee. Other than the
retainer for his services as a member of the Audit Committee, which must be paid in cash, Mr. Harrison elected to receive 50% of
the aggregate retainer owed for his services as a director in stock options in lieu of cash for the quarters ended June 30, 2015,
and September 31, 2015. For the quarters ended December 31, 2015, and March 31, 2016, Mr. Harrison elected to receive 50% of the
aggregate retainer owed for his services as a director, other than the retainer for his services as a member of the Audit Committee,
in common stock in lieu of cash. Pursuant to the Director Compensation Program, we paid an additional $3,950 in cash representing
the 40% tax gross up owed Mr. Harrison for all fees paid in stock. Additionally, pursuant to the non-employee director compensation
plan, Mr. Harrison received an annual grant in February 2016 consisting of 2,250 shares of common stock and $4,455 in cash, representing
the 40% tax gross up. The table reflects a payment of $6,813 in cash and $4,938 in common stock made in June 2016 for service during
the period of January 1, 2016 through March 31, 2016, and a payment of $6,813 in cash and $4,938 in options made in June 2015 for
services during the period January 1 to March 31, 2015.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 59; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->57<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(9)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">For the fiscal year ended in March 31, 2016, Ms. Barbari earned $44,500
for her services as a director. Of this aggregate amount of $44,500, Ms. Barbari received $32,500 as her annual retainer for serving
on the Board, $10,000 for her services as the chairperson of the Audit Committee, $2,000, for her services as a member of the Nominating
and Corporate Governance Committee. Other than the retainer for her services as the chairperson of the Audit Committee, which must
be paid in cash, Ms. Barbari elected to receive 50% of the aggregate retainer owed for her services as a director in stock options
in lieu of cash for the quarters ended June 30, 2015, and September 31, 2015. For the quarters ended December 31, 2015, and March
31, 2016, Ms. Barbari elected to receive 50% of the aggregate retainer owed for her services as a director, other than the retainer
for her services as the chairperson of the Audit Committee, in common stock in lieu of cash. Pursuant to the Director Compensation
Program we paid an additional $3,450 in cash representing the 40% tax gross up owed Ms. Barbari for all fees paid in stock. Additionally,
pursuant to the non-employee director compensation plan, Ms. Barbari received an annual grant in February 2016 consisting of 2,250
shares of common stock and $4,455 in cash, representing the 40% tax gross up. The retainer fee reflects a payment of $6,813 in
cash and $4,313 in common stock made in June 2016 for service during the period of January 1, 2016 through March 31, 2016, and
a payment of $6,813 in cash and $4,313 in options made in June 2015 for services during the period January 1 to March 31, 2015.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(10)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">For the fiscal year ended in March 31, 2016, Mr. Birnbaum earned $40,000
for his services as a director. Of this aggregate amount of $40,000, Mr. Birnbaum received $32,500 as his annual retainer for serving
on the Board, $7,500 for his services as a member of the Audit Committee. Other than the retainer for his services as a member
of the Audit Committee, which must be paid in cash, Mr. Birnbaum elected to receive 50% of the aggregate retainer owed for his
services as a director in stock options in lieu of cash for the quarters ended June 30, 2015, and September 31, 2015. For the quarters
ended December 31, 2015, and March 31, 2016, Mr. Birnbaum elected to receive 50% of the aggregate retainer owed for his services
as a director, other than the retainer for his services as a member of the Audit Committee, in common stock in lieu of cash. Pursuant
to the Director Compensation Program we paid an additional $3,250 in cash representing the 40% tax gross up owed Mr. Birnbaum for
all fees paid in stock. Additionally, pursuant to the non-employee director compensation plan, Mr. Birnbaum received an annual
grant in February 2016 consisting of 2,250 shares of common stock and $4,455 in cash, representing the 40% tax gross up. The retainer
fee reflects a payment of $5,938 in cash and $4,063 in common stock made in June 2016 for service during the period of January
1, 2016 through March 31, 2016, and a payment of $5,938 in cash and $4,063 in options made in June 2015 for services during the
period January 1 to March 31, 2015.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(11)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">For the fiscal year ended in March 31, 2016, Mr. McLaughlin earned $52,500
for his services as a director. Of this aggregate amount of $52,500, Mr. McLaughlin received $32,500 as his annual retainer for
serving on the Board, $15,000 for his annual retainer as the Lead Independent Director and $5,000, for his services as the chairperson
of the Compensation Committee. Mr. McLaughlin elected to receive 50% of the aggregate retainer owed for his services as a director
in stock options in lieu of cash for the quarters ended June 30, 2015, and September 31, 2015. For the quarters ended December
31, 2015, and March 31, 2016, Mr. McLaughlin elected to receive 50% of the aggregate retainer owed for his services as a director
in common stock in lieu of cash. Pursuant to the Director Compensation Program we paid an additional $5,249 in cash representing
the 40% tax gross up owed to Mr. McLaughlin for all fees paid in stock. Additionally, pursuant to the non-employee director compensation
plan, Mr. McLaughlin received an annual grant in February 2016 consisting of 2,250 shares of common stock and $4,455 in cash, representing
the 40% tax gross up. The retainer fee reflects a payment of $6,563 in cash and $6,563 in common stock made in June 2016 for service
during the period of January 1, 2016 through March 31, 2016, and a payment of $6,563 in cash and $6,563 in options made in June
2015 for services during the period January 1 to March 31, 2015.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>


<!-- Field: Page; Sequence: 60; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->58<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Narrative to Director Compensation Table </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">All share numbers have been adjusted for the 1&ndash;for&ndash;5
reverse stock split effective June 24, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt"><B><I>Non-Employee
Director Compensation Plan Adopted February 24, 2016</I></B><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0; text-align: justify">Pursuant to our restated and amended
non-employee director compensation plan adopted February 24, 2016, as of April 1, 2016, each non-employee director is entitled
to the following annual retainers:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 88%"><FONT STYLE="font-size: 10pt">Board Member</FONT></TD>
    <TD STYLE="width: 9%"><FONT STYLE="font-size: 10pt">$32,500</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Lead Independent Director</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">$15,000</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Chair of the Audit Committee</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">$10,000</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Chair of the Compensation Committee</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">$7,500</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Chair of the Nominating and Corporate Governance Committee</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">$7,500</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Audit Committee member (other than Chair)</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">$7,500</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Compensation Committee Member (other than Chair)</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">$7,500</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Nominating and Corporate Governance Committee Member (other than the Chair)</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">$7,500</FONT></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">All Audit
Committee retainers must be paid in cash. All other retainers may be paid in (i) cash, (ii) options or (iii) as a stock grant with
an additional cash payment equal to 0.40 multiplied by the number of shares of common stock granted multiplied by the closing price
of the common stock on the NASDAQ Capital Market on the day of the grant, at the election of each director. We also reimburse our
non-employee directors for reasonable expenses in connection with attendance at board of director and committee meetings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">In addition
to cash compensation for services as a member of the board, non-employee directors are also eligible to receive nondiscretionary,
automatic grants of stock options under the Non-Employee Director Compensation Plan. An outside, non-employee director who joins
our board is automatically granted an initial option to purchase 10,000 shares upon first becoming a member of our board. The initial
option vests and becomes exercisable over three years, with 3,334 shares vesting on the first anniversary of the date of grant
and the remainder vesting monthly thereafter. Each non-employee director will receive an annual grant of 2,250 shares of common
stock on the last business day in February. Such shares of common stock will vest immediately on the day of grant. Additionally,
each non-employee director receiving an annual grant will receive an additional cash payment equal to 0.40 multiplied by the number
of shares of common stock granted multiplied by the closing price of the common stock on the Trading Market on the last business
day in February. No annual grant shall be granted to any non-employee director in the same calendar year that such person received
his or her initial grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">In the interest
of good corporate governance and to further align the interests of members of the Board of Directors with the Company&rsquo;s stockholders,
the Nominating and Corporate Governance Committee of the Board of Directors has adopted stock ownership guidelines for directors.
Under these guidelines, if a Director exercises a stock option, it is expected that such director would, from such date of option
exercise, maintain ownership of at least a number of shares equal to twenty percent of the net value of the shares acquired (after
deducting the exercise price and taxes). In the case of shares acquired upon the exercise of a stock option, each director is expected
to hold such shares for nine months after termination of his or her service on the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt"><B><I>Non-Employee
Director Compensation Plan Prior to February 24, 2016</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">Pursuant
to our non-employee director compensation plan prior to February 24, 2016, each non-employee director was entitled to the following
annual retainers:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0; text-align: justify"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 88%"><FONT STYLE="font-size: 10pt">Board Member</FONT></TD>
    <TD STYLE="width: 9%"><FONT STYLE="font-size: 10pt">$32,500</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Lead Independent Director</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">$15,000</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Chair of the Audit Committee</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">$10,000</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Chair of the Compensation Committee</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">$5,000</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Chair of the Nominating and Corporate Governance Committee</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">$5,000</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Audit Committee member (other than Chair)</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">$7,500</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Compensation Committee Member (other than Chair)</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">$2,000</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Nominating and Corporate Governance Committee Member (other than the Chair)</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">$2,000</FONT></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 61; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->59<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.7pt; text-align: justify; text-indent: -0.7pt">All Audit Committee
retainers must be paid in cash. All other retainers may be paid in cash, options or as a stock grant, at the election of each director.
We also reimburse our non-employee directors for reasonable expenses in connection with attendance at board of director and committee
meetings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.7pt; text-align: justify; text-indent: -0.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.7pt; text-align: justify; text-indent: -0.7pt">In addition
to cash compensation for services as a member of the board, non-employee directors are also eligible to receive nondiscretionary,
automatic grants of stock options under the Non-Employee Director Compensation Plan. An outside, non-employee director who joins
our board is automatically granted an initial option to purchase 10,000 shares upon first becoming a member of our board. The initial
option vests and becomes exercisable over three years, with the first one-third of the shares vesting on the first anniversary
of the date of grant and the remainder vesting in equal monthly increments thereafter. After each of our regularly scheduled Annual
Meetings of Stockholders, each non-employee director is automatically granted an option to purchase 3,000 shares of our common
stock, provided that no annual grant shall be granted to a non-employee director in the same calendar year that such person received
his or her initial grant. These options vest in equal monthly increments over the period of one year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.7pt; text-align: justify; text-indent: -0.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.7pt; text-align: justify; text-indent: -0.7pt">In July 2014,
the Board eliminated the provisions in the 2006 Plan that provided for automatic option grants to non-employee directors to eliminate
redundancy in our non-employee director compensation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt"><B>Executive
Officers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">The Company
has the following executive officers:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; color: red">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 17%; border: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Name</B></FONT></TD>
    <TD STYLE="width: 5%; border-top: black 1pt solid; border-right: black 1pt solid; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Age</B></FONT></TD>
    <TD STYLE="width: 78%; border-top: black 1pt solid; border-right: black 1pt solid; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Position with the Company</B></FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Jim Schutz</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">53 </FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Chief Executive Officer</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Robert Miller</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">73</FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Secretary, Chief Financial Officer, Chief Operating Officer</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Bruce Thornton</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">52 </FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Executive Vice President</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Robert Northey </FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">59 </FONT></TD>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; border-right: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Executive Vice President of Research and Development </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; color: red">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify">The biographies of our executive
officers and certain information regarding each officer&rsquo;s experience, attributes, skills and/or qualifications that led to
the conclusion that the officer should be serving as an officer of the Company are stated below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; color: red">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Jim Schutz</I>: For Mr. Schutz&rsquo;s full biography, please
refer to page <A HREF="#a30">55</A> in the section entitled &ldquo;Directors.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;<FONT STYLE="color: red">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Robert Miller</I>: Mr. Miller has served
as our Chief Financial Officer since June 2004 and Secretary and Chief Operating Officer since February 2013. He was a consultant
to us from March 2003 to May 2004. Mr. Miller has served as a director of Scanis, Inc., a technology company, since 1998 and served
as the acting Chief Financial Officer of Scanis from 1998 to June 2006. He was a Chief Financial Officer consultant to Evit Labs
from June 2003 to December 2004, Wildlife International Network from October 2002 to December 2005, Endoscopic Technologies from
November 2002 to March 2004, Biolog from January 2000 to December 2002 and Webware from August 2000 to August 2002. Prior to this,
Mr. Miller was the Chief Financial Officer for GAF Corporation, Penwest Ltd. and Bugle Boy, and the Treasurer of Mead Corporation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Bruce Thornton</I>: Mr. Thornton has been
working for our Company for a decade. Since June 2005, he served as Executive Vice President of International Operations and Sales.
He has an extensive knowledge of our operations, the market for our products and our vision and goals for the future. Mr. Thornton
served as our General Manager for U.S. operations from March 2004 to July 2005. He served as Vice President of Operations for Jomed
(formerly EndoSonic Corp.) from January 1999 to September 2003, and as Vice President of Manufacturing for Volcano Therapeutics,
an international medical device company, following its acquisition of Jomed, until March 2004.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Robert Northey, Ph.D.</I>: Dr. Northey has
served as our Executive Vice President of Research and Development since July 2005. Dr. Northey served as a consultant to us from
May 2001 to June 2005. From August 1998 until June 2005, he was an assistant professor in the paper science and engineering department
at the University of Washington. Dr. Northey received a B.S. in wood and fiber science and a Ph.D. in wood chemistry, each from
the University of Washington.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Marc Umscheid</I>: Mr. Umscheid has
served as our Chief Strategy and Chief Marketing Officer since December 2016. Mr. Umscheid served as the Senior Marketing Director
and Business Development team leader. Mr. Umscheid received a B.S. in business and management/finance from Cornell University
and an MBA from the Johnson Graduate School of Management.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 4.3pt 0 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 4.3pt 0 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 4.3pt 0 0; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 62; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->60<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt"><B>Executive Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">This prospectus contains information about
the compensation paid to our Named Executive Officers, as defined by Item&nbsp;402(m)(2) of Regulation S-K, during our fiscal year
ended March 31, 2016, or fiscal year 2016. For fiscal year 2016, in accordance with the rules and regulations of the Securities
and Exchange Commission for smaller reporting companies, we determined that the following officers were our Named Executive Officers:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font-size: 10pt">Jim Schutz, Chief Executive Officer,</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font-size: 10pt">Bob Miller, Chief Financial Officer,</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font-size: 10pt">Bruce Thornton, Executive Vice President of International Sales, and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font-size: 10pt">Robert Northey, Executive Vice President of Research and Development </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Summary Compensation Table </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">The following
table sets forth, for the fiscal years ended March 31, 2016 and 2015, all compensation paid or earned by (i) all individuals serving
as our Principal Executive Officer; (ii) our two most highly compensated executive officers, other than our Principal Executive
Officer, who were serving as executive officers at the end of our fiscal year ended March 31, 2016; and (iii) up to two individuals
for whom disclosure would have been provided but for the fact that the individual was not serving as an executive officer. These
executive officers are referred to herein as our &ldquo;Named Executive Officers.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom; background-color: #D9D9D9">
    <TD STYLE="width: 27%; border: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Name and Principal <BR>
Position</B></FONT></TD>
    <TD STYLE="width: 13%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Fiscal Year<BR>
 Ended <BR>
March 31, <BR>
2016</B></FONT></TD>
    <TD STYLE="width: 11%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Salary ($)</B></FONT></TD>
    <TD STYLE="width: 13%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 5.5pt 0 0; text-align: center"><B>Bonus </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 5.5pt 0 0; text-align: center"><B>($)</B></P></TD>
    <TD STYLE="width: 12%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Option<BR>
 Awards <BR>
($) (1) (2)</B></FONT></TD>
    <TD STYLE="width: 13%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>All Other<BR>
 Compen-<BR>
sation ($)</B></FONT></TD>
    <TD STYLE="width: 11%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 5.5pt 0 0; text-align: center"><B>Total </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 5.5pt 0 0; text-align: center"><B>($)</B></P></TD></TR>
<TR>
    <TD ROWSPAN="2" STYLE="vertical-align: top; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Jim Schutz</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Chief Executive Officer</I></P></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2016</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">250,000</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">50,601 (3)</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">300,601</FONT></TD></TR>
<TR>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2015</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">250,000</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">46,215 (4)</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">296,215</FONT></TD></TR>
<TR STYLE="background-color: #D9D9D9">
    <TD ROWSPAN="2" STYLE="vertical-align: top; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Robert Miller</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.05in 0 0"><I>Secretary, Chief Financial Officer and Chief Operating
        Officer</I></P></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2016</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">250,000</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">30,402</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">45,319 (5)</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">325,721</FONT></TD></TR>
<TR STYLE="background-color: #D9D9D9">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2015</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">250,000</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">71,053 (6)</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">321,053</FONT></TD></TR>
<TR>
    <TD ROWSPAN="2" STYLE="vertical-align: top; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Bruce Thornton</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Executive Vice President of International Operations and Sales</I></P></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2016</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">250,000</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">40,862</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">53.615 (7)</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">344,477</FONT></TD></TR>
<TR>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2015</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">250,000</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">20,000 (8)</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">55,860 (9)</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">325,860</FONT></TD></TR>
<TR STYLE="background-color: #D9D9D9">
    <TD ROWSPAN="2" STYLE="vertical-align: top; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Robert Northey</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.05in 0 0"><I>Executive Vice President of Research and Development</I></P></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2016</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">194,000</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">20,000 (10)</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">38,002</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">44,886 (11)</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">296,888</FONT></TD></TR>
<TR STYLE="background-color: #D9D9D9">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2015</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">185,000</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">30,000 (12)</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">40,828 (13)</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">255,828</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(1)</TD><TD STYLE="text-align: justify; padding-right: 22.5pt">Represents the aggregate grant date fair value of stock option awards granted
in the covered fiscal year as computed in accordance with FASB ASC Topic 718, Compensation &mdash; Stock Compensation. The fair
value of each stock option award is estimated for the covered fiscal year on the date of grant using the Black-Scholes option valuation
model. A discussion of the assumptions used in calculating the amounts in this column may be found in Note 14 to our audited consolidated
financial statements for the year ended March 31, 2016, included in our Annual Report on Form 10-K filed with the SEC on June 21,
2016. The amounts in this column do not represent the actual amounts paid to or realized by our Named Executive Officers during
the fiscal years ended March 31, 2016 and 2015.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 63; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->61<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(2)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">No stock options were awarded during the fiscal year ended March 31, 2015.
On August 21, 2015, we granted stock options to the executive officers pursuant to our 2016 Bonus Plan. The 2016 options were awarded
pursuant to our Stock Incentive Plans in effect for the applicable fiscal year. All bonus options granted in 2016 vested based
on the achievement of target goals and milestones, with specific milestones and a bonus potential range for each executive officer.
The bonus did not entitle executive officers to payment of a bonus but rather allowed for potential bonuses for executive officers
if they meet their respective target goals and milestones, subject to the determination of the Compensation Committee. Options
only vested, in whole or in part, in the event the executive achieved a minimum of 80% of each of his target milestones in the
applicable fiscal year, as determined by the Compensation Committee by June 30, 2016. If the executive achieved at least 80% of
the target milestones by March 31, 2016, then 80% of the executive&rsquo;s options vested on June 30, 2016, as determined by the
Compensation Committee. The exercise price of the options granted in 2016 is the adjusted closing price of the Company&rsquo;s
common stock on the date of grant. The stock options if vested have a term of ten years.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(3)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">The 2016 perquisites and personal benefits for Mr. Schutz include (a) personal
use of a Company automobile in the amount of $2,055, (b) matching 401k contribution in the amount of $10,000, and (c) payment of
$38,546 to cover premium for life, health, dental and vision insurance policy for the benefit of Mr. Schutz.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(4)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">The 2015 perquisites and personal benefits for Mr. Schutz include (a) personal
use of a Company automobile in the amount of $2,055, (b) matching 401k contribution in the amount of $10,000, and (c) payment of
$34,160 to cover premium for life, health, dental and vision insurance policy for the benefit of Mr. Schutz.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(5)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">The 2016 perquisites and personal benefits for Mr. Miller include (a) matching
401k contribution in the amount of $10,000, and (b) payment of $35,319 to cover premium for life, health, dental and vision insurance
policy for the benefit of Mr. Miller.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(6)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">The 2015 perquisites and personal benefits for Mr. Miller include (a) matching
401k contribution in the amount of $10,000, and (b) payment of $61,053 to cover premium for life, health, dental and vision insurance
policy for the benefit of Mr. Miller.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(7)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">The 2016 perquisites and personal benefits for Mr. Thornton include (a)
a car allowance in the amount of $11,700, (b) matching 401k contribution in the amount of $10,000, and (c) payment of $31,915 to
cover premiums for life, health, dental and vision insurance policies for the benefit of Mr. Thornton.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(8)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">Mr. Thornton&rsquo;s 2015 bonus consisted of a one-time cash bonus of $20,000.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(9)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">The 2015 perquisites and personal benefits for Mr. Thornton include (a)
a car allowance in the amount of $11,700, (b) matching 401k contribution in the amount of $10,000, and (c) payment of $34,160 to
cover premiums for life, health, dental and vision insurance policies for the benefit of Mr. Thornton.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(10)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">Mr. Northey&rsquo;s 2016 bonus compensation consisted of a one-time cash
bonus of $20,000.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(11)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">The 2016 perquisites and personal benefits for Mr. Northey include (a)
matching 401k contribution in the amount of $7,656, and (b) payment of $37,230 to cover premiums for life, health, dental and vision
insurance policies for the benefit of Mr. Northey.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(12)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">Mr. Northey&rsquo;s 2015 bonus compensation consisted of a one-time cash
bonus of $30,000.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(13)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">The 2015 perquisites and personal benefits for Mr. Northey include (a)
matching 401k contribution in the amount of $7,400, and (b) payment of $33,428 to cover premiums for life, health, dental and vision
insurance policies for the benefit of Mr. Northey.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 64; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->62<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0; text-align: justify"><B>Employment Agreements and Potential
Payments upon Termination </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0; text-align: justify"><B><I>Employment Agreement with Mr.
Jim Schutz </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 26, 2016, we entered into a new employment
agreement with Jim Schutz, our President and Chief Executive Officer to update his agreements and responsibilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The terms of the new employment agreement provide
for a continued annual base salary of $250,000 or such other amount as the Board of Directors may set. In addition, Mr. Schutz
is eligible to receive an annual bonus, the payment, type and amount of which is in the sole discretion of the Compensation Committee.
Mr. Schutz also receives certain benefits, such as participation in our health and welfare plans, vacation and reimbursement of
expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The employment agreement provides Mr. Schutz
with certain separation benefits in the event of termination without cause, upon change of control or resignation by the executive
for good reason; as such terms are defined in the employment agreement. In the event Mr. Schutz is terminated without cause, or
upon change of control, or resigns for good reason, he is entitled to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 21.65pt">a lump severance payment equal to one-and-a-half times the executive&rsquo;s
base salary;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 21.65pt">a bonus, upon determination by the Corporation&rsquo;s Board of Directors
or Compensation Committee, as appropriate, to be made in its sole discretion as to whether to grant a bonus, and if such bonus
is granted, the amount, form and payment schedule. For the avoidance of doubt, executive shall not be entitled to any bonus solely
for reason of termination, unless the Board of Directors or the Compensation Committee, as appropriate, in its sole discretion
awards a bonus to executive;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 21.65pt">automatic vesting of all unvested time-based options and equity awards
and exercisability of awards for the remainder of their respective terms;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 21.65pt">vesting of performance-based equity compensation awards in accordance with
the terms of the awards, if the performance goals are satisfied; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 21.65pt">up to 18 months (the lesser of one year following the date of termination
or until such executive becomes eligible for medical insurance coverage provided by another employer) reimbursement for health
care premiums under COBRA.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Mr. Schutz may terminate his employment for
any reason upon at least 30 days prior written notice. Receipt of the termination benefits described above is contingent on each
executive executing a general release of claims against our Company, his resignation from any and all directorships and every other
position held by him with our Company or any of our subsidiaries, and his return to our Company of all Company property received
from or on account of our Company or any of our affiliates by such executive. In addition, the executive is not entitled to such
benefits if he did not comply with the non-competition and invention assignment provisions of his employment agreement during the
term of his employment or the confidentiality provisions of his employment agreement, whether during or after the term of his employment.
Furthermore, we are under no obligation to pay the above-mentioned benefits if the executive does not comply with the non-solicitation
provisions of his employment agreement, which prohibit a terminated executive from interfering with the business relations of our
Company or any of our affiliates and from soliciting employees of our Company. These provisions apply during the term of employment
and for two years following termination.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the entry into the new agreement,
the Compensation Committee intended to eliminate certain outdated pay practices, including providing a full tax gross up upon termination,
automatic vesting of all performance-based equity awards under certain circumstances, and single-trigger change of control payments.
Additionally, the Compensation Committee wanted to bring the employment agreement in line with current law by adding provisions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0; text-align: justify"><B><I>Employment Agreement with Mr.
Robert Miller </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.5pt">On November 30, 2016,
we entered into a new employment agreement with Robert Miller, our Chief Financial Officer, to update his agreements and responsibilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.5pt">The terms of the new employment
agreement provide for a continued annual base salary of $250,000 or such other amount as the Board of Directors may set. In addition,
Mr. Miller is eligible to receive an annual bonus, the payment, type and amount of which is in the sole discretion of the Compensation
Committee. Mr. Miller also receives certain benefits, such as participation in our health and welfare plans, vacation, and reimbursement
of expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.5pt">&nbsp;</P>


<!-- Field: Page; Sequence: 65; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->63<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.5pt">The employment agreement
provides Mr. Miller with certain separation benefits in the event of termination without cause, upon change of control or resignation
by him for good reason; as such terms are defined in the employment agreement. In the event Mr. Miller is terminated without cause,
or upon change of control, or resigns for good reason, Mr. Miller is entitled to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">a lump sum severance payment equal to one-and-a-half times Mr. Miller&rsquo;s base salary;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">a bonus, upon determination by the Corporation&rsquo;s Board of Directors or Compensation Committee, as appropriate, to be made in its sole discretion as to whether to grant a bonus, and if such bonus is granted, the amount, form and payment schedule. For the avoidance of doubt, Mr. Miller shall not be entitled to any bonus solely for reason of termination, unless the Board of Directors or the Compensation Committee, as appropriate, in its sole discretion awards such bonus;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">automatic vesting of all unvested time-based options and equity awards and exercisability of awards for the remainder of their respective terms;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">vesting of performance-based equity compensation awards in accordance with the terms of the awards, if the performance goals are satisfied; and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">up to 18 months (the lesser of one year following the date of termination or until such executive becomes eligible for medical insurance coverage provided by another employer) reimbursement for health care premiums under COBRA.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Mr. Miller may terminate his employment for
any reason upon at least 30 days prior written notice. Receipt of the termination benefits described above is contingent on Mr.
Miller executing a general release of claims against our Company, his resignation from any and all directorships and every other
position held by him with our Company or any of our subsidiaries, and his return to our Company of all Company property received
from or on account of our Company or any of our affiliates by him. In addition, Mr. Miller is not entitled to such benefits if
he did not comply with the non-competition and invention assignment provisions of his employment agreement during the term of his
employment or the confidentiality provisions of his employment agreement, whether during or after the term of his employment. Furthermore,
we are under no obligation to pay the above-mentioned benefits if Mr. Miller does not comply with the non-solicitation provisions
of his employment agreement, which prohibit a terminated executive from interfering with the business relations of our Company
or any of our affiliates and from soliciting employees of our Company. These provisions apply during the term of employment and
for two years following termination.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Employment Agreements with Mr. Bruce
Thornton and Mr. Robert Northey</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.5pt">On November 30, 2016,
we entered into new employment agreements with Bruce Thornton, our Executive Vice President of International Operations and Sales,
and Robert Northey, our Executive Vice President of Research and Development, to update their agreements and responsibilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.5pt">The terms of the new employment
agreements for Mr. Thornton and Mr. Northey provide for a continued annual base salary of $250,000 and $203,963.76, respectively,
or such other amount as the Board of Directors may set. In addition, Mr. Thornton and Mr. Northey are eligible to receive an annual
bonus, the payment, type and amount of which is in the sole discretion of the Compensation Committee. Mr. Thornton and Mr. Northey
also receive certain benefits, such as participation in our health and welfare plans, vacation, and reimbursement of expenses.
Mr. Thornton also receives a car allowance in the amount of $900 per month, which car allowance may be increased, decreased, or
eliminated in our sole discretion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.5pt">The employment agreements
provide Mr. Thornton and Mr. Northey with certain separation benefits in the event of termination without cause, upon change of
control or resignation for good reason; as such terms are defined in the employment agreements. In the event either Mr. Thornton
or Mr. Northey is terminated without cause, or upon change of control, or resigns for good reason, the terminated executive is
entitled to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">a lump sum severance payment equal to one time his base salary;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>


<!-- Field: Page; Sequence: 66; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->64<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">a bonus, upon determination by the Corporation&rsquo;s Board of Directors or Compensation Committee, as appropriate, to be made in its sole discretion as to whether to grant a bonus, and if such bonus is granted, the amount, form and payment schedule. For the avoidance of doubt, neither Mr. Thornton nor Mr. Northey shall be entitled to any bonus solely for reason of termination, unless the Board of Directors or the Compensation Committee, as appropriate, in its sole discretion awards such bonus;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">automatic vesting of all unvested time-based options and equity awards and exercisability of awards for the remainder of their respective terms;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">vesting of performance-based equity compensation awards in accordance with the terms of the awards, if the performance goals are satisfied, such determination to be in the sole discretion of the Compensation Committee or the Board, as the case may be; and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">reimbursement for health care premiums under COBRA until the earliest of: (i) one year following the date of termination; (ii) the date he is no longer eligible to receive COBRA continuation coverage; or (iii) until he becomes eligible for medical insurance coverage provided by another employer.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Mr. Thornton and Mr. Northey may terminate
their employment for any reason upon at least 30 days prior written notice. Receipt of the termination benefits described above
is contingent on executing a general release of claims against our Company, resignation from any and all directorships and every
other position held by the executive with our Company or any of our subsidiaries, and the executive&rsquo;s return to our Company
of all Company property received from or on account of our Company or any of our affiliates by him. In addition, Mr. Thornton and
Mr. Northey are not entitled to such benefits if they did not comply with the non-competition and invention assignment provisions
of their employment agreements during the terms of their employment or the confidentiality provisions of their employment agreements,
whether during or after the terms of their employment. Furthermore, we are under no obligation to pay the above-mentioned benefits
if Mr. Thornton or Mr. Northey do not comply with the non-solicitation provisions of their employment agreements, which prohibit
a terminated executive from interfering with the business relations of our Company or any of our affiliates and from soliciting
employees of our Company. These provisions apply during the term of employment and for two years following termination.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Potential Payments upon Termination</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 4.45pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 4.45pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">The table
below was prepared as though each of Messrs. Schutz, Miller, Thornton, and Northey had been terminated on March 31, 2016, the last
day of our last completed fiscal year, without cause, or upon change of control, or resigned for good reason, as these terms are
defined in the agreements with our Company. More detailed information about the payment of benefits, including duration, is contained
in the discussion above. All such payments and benefits would be provided by our Company. The assumptions and valuations are noted
in the footnotes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 4.45pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom; background-color: #D9D9D9">
    <TD STYLE="width: 63%; border: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Name</B></FONT></TD>
    <TD STYLE="width: 13%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Salary</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Continuation<BR>
 ($)</B></FONT></TD>
    <TD STYLE="width: 13%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Health and<BR>
 Welfare</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Benefits</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Continuation<BR>
 ($) (1)</B></FONT></TD>
    <TD STYLE="width: 11%; border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Excise and <BR>
Tax<BR>
        Gross-up </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>($) (2)</B></P></TD></TR>
<TR>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Jim Schutz</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">375,000</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">38,546</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD></TR>
<TR STYLE="background-color: #D9D9D9">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Robert Miller</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">375,000</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">35,319</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">191,824</FONT></TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Bruce Thornton</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">250,000</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">31,915</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">131,795</FONT></TD></TR>
<TR STYLE="background-color: #D9D9D9">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Robert Northey</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">194,000</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">37,230</FONT></TD>
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">108,100</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(1)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">Amount assumes our cost of providing life, health, dental and vision insurance
at the same rate for 12 months.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(2)</TD><TD STYLE="text-align: justify; padding-right: 0.3pt">In calculating these amounts we assumed a termination date on March 31, 2016,
and the maximum Federal and California income and other payroll taxes, aggregating an effective tax rate of 46.75%.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>


<!-- Field: Page; Sequence: 67; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->65<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Annual Incentive Plans </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.7pt; text-align: justify; text-indent: -0.7pt">Pursuant to
our annual Bonus Plan, executive officers of our Company, including Messrs. Schutz, Miller, Thornton, and Northey have the potential
to earn an annual bonus based on the individual&rsquo;s contribution to the Company&rsquo;s target goals and milestones. Specific
goals and milestones and a bonus potential range for each executive officer are set forth in the bonus plan. The Compensation Committee
determines whether a bonus pool for executive officers will be established within a specified time period after the end of each
fiscal year. If a bonus pool is established, the Compensation Committee has discretion to set appropriate bonus amounts within
an executive officer&rsquo;s bonus range, based on the Compensation Committee&rsquo;s assessment of corporate and individual achievements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.7pt; text-align: justify; text-indent: -0.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.7pt; text-align: justify; text-indent: -0.7pt">The Compensation
Committee may decide that bonuses awarded to executive officers under the bonus plan will be paid in cash, stock options, stock
or a combination of cash, options, and/or stock depending on our year-end cash position, cash needs and projected cash receipts.
The Compensation Committee will not declare any bonus pool or grant any cash awards that will endanger our ability to finance our
operations and strategic objectives or place us in a negative cash flow position, in light of our anticipated cash needs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>2015 Bonus Awards for Named Executive
Officers </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.7pt; text-align: justify; text-indent: -0.7pt">We awarded Mr.
Northey, our Vice President of Research and Development a bonus of $20,000 for his efforts related to the research and development
and launch of new products in fiscal year 2015. The bonus was paid in fiscal year 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.7pt; text-align: justify; text-indent: -0.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.7pt; text-align: justify; text-indent: -0.7pt">We awarded Mr.
Thornton, our Executive Vice President of International Operations and Sales, a bonus of $20,000 for meeting milestones established
in his compensation and bonus plan in fiscal year 2015. The bonus was paid in fiscal year 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.7pt; text-align: justify; text-indent: -0.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>2016 Bonus Awards for Named Executive
Officers </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">For fiscal
year 2016, each executive officer, including our Named Executive Officers, had the potential to earn an annual bonus based on the
Compensation Committee&rsquo;s assessment of the individual&rsquo;s and our Company&rsquo;s contribution to target goals and milestones.
Specific goals and milestones and a bonus potential range for employees and executive officers, including our Named Executive Officers,
was set forth in the bonus plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">For fiscal
year 2016, the Compensation Committee granted stock options to executive officers. Such stock options vested in whole or in part
in the event that each executive officer meets target milestones established in the Fiscal Year 2016 Bonus Plan. On July 26, 2016,
the Compensation Committee determined that target milestones have been met in part and determined that part of the options vested.
Employees were eligible for a similar bonus program.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25pt; text-align: justify">The table below shows the grant
and vesting of FY 2016 bonus options for our Named Executive Officers. Share numbers have been adjusted for the 1-for-5 reverse
stock split effective June 24, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="background-color: #D9D9D9">
    <TD STYLE="width: 57%; border: #A5A5A5 1pt solid; text-align: center"><BR CLEAR="ALL">
<FONT STYLE="font-size: 10pt"><B>Name</B></FONT></TD>
    <TD STYLE="width: 22%; border-top: #A5A5A5 1pt solid; border-right: #A5A5A5 1pt solid; border-bottom: #A5A5A5 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 3.7pt 0 0.5pt; text-align: center; text-indent: -0.5pt"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 3.7pt 0 0.5pt; text-align: center; text-indent: -0.5pt"><B>Number
        of options<BR>
 granted (1)</B></P></TD>
    <TD STYLE="vertical-align: bottom; width: 21%; border-top: #A5A5A5 1pt solid; border-right: #A5A5A5 1pt solid; border-bottom: #A5A5A5 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Number of options<BR>
 vested (2)</B></FONT></TD></TR>
<TR>
    <TD STYLE="border-right: #A5A5A5 1pt solid; border-bottom: #A5A5A5 1pt solid; border-left: #A5A5A5 1pt solid"><FONT STYLE="font-size: 10pt">Jim Schutz</FONT></TD>
    <TD STYLE="border-right: #A5A5A5 1pt solid; border-bottom: #A5A5A5 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: #A5A5A5 1pt solid; border-bottom: #A5A5A5 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD></TR>
<TR STYLE="background-color: #D9D9D9">
    <TD STYLE="border-right: #A5A5A5 1pt solid; border-bottom: #A5A5A5 1pt solid; border-left: #A5A5A5 1pt solid"><FONT STYLE="font-size: 10pt">Robert Miller</FONT></TD>
    <TD STYLE="border-right: #A5A5A5 1pt solid; border-bottom: #A5A5A5 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">8,000</FONT></TD>
    <TD STYLE="border-right: #A5A5A5 1pt solid; border-bottom: #A5A5A5 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">7,912</FONT></TD></TR>
<TR>
    <TD STYLE="border-right: #A5A5A5 1pt solid; border-bottom: #A5A5A5 1pt solid; border-left: #A5A5A5 1pt solid"><FONT STYLE="font-size: 10pt">Bruce Thornton</FONT></TD>
    <TD STYLE="border-right: #A5A5A5 1pt solid; border-bottom: #A5A5A5 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">10,000</FONT></TD>
    <TD STYLE="border-right: #A5A5A5 1pt solid; border-bottom: #A5A5A5 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">9,870</FONT></TD></TR>
<TR STYLE="background-color: #D9D9D9">
    <TD STYLE="border-right: #A5A5A5 1pt solid; border-bottom: #A5A5A5 1pt solid; border-left: #A5A5A5 1pt solid"><FONT STYLE="font-size: 10pt">Robert Northey</FONT></TD>
    <TD STYLE="border-right: #A5A5A5 1pt solid; border-bottom: #A5A5A5 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">10,000</FONT></TD>
    <TD STYLE="border-right: #A5A5A5 1pt solid; border-bottom: #A5A5A5 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">9,890</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25pt"><I>&nbsp;</I></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 36pt"></TD><TD STYLE="width: 35.1pt">(1)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">The exercise price of $5.80 equals the adjusted closing price of our common
stock on the day of the grant, August 21, 2015.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 36pt"></TD><TD STYLE="width: 35.1pt">(2)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">Such options vested in whole or in part in the event the executive achieved
a minimum of 80% of his target milestones. If such executive did not achieve 80% of their target milestones, then 100% of the options
expired. If the executive achieved at least 80% of his target milestones, then 80% of the executive&rsquo;s options vested. The
vesting of the remaining of the remaining 20% was in the discretion of the Compensation Committee.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 68; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->66<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Based on our fiscal year 2016 bonus plan and
our financial results in fiscal year 2016, we awarded Jim Schutz, our Chief Executive Officer, $57,000 in total bonus compensation
for his achievements in fiscal year 2016. Of this amount, $40,000 was paid in cash. The remaining $17,000 was paid in shares of
our common stock. Based on a closing price on November 30, 216 of $4.81, we converted the $17,000 into 3,535 shares. We also made
an additional payment to Mr. Schutz of $6,800 as a tax gross up for the stock issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We awarded bonuses to certain officers of the
Company as compensation for their dedication and service in building our business in Mexico. That business was subsequently sold
to Invekra, S.A.P.I de C.V. for $22 million in October 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We granted Robert Miller, our Chief Financial
Officer, $75,000 in our common stock, or 15,593 shares based on the closing price of our common stock of $4.81 on November 30,
2016. We also made an additional payment to Mr. Miller of $30,000 as a tax gross up for the stock issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We paid $40,000 to Robert Northey, our Executive
Vice President of Research and Development. We also granted Mr. Northey, $22,500 in our common stock, or 4,678 shares based on
the closing price of our common stock of $4.81 on November 30, 2016. We also made an additional payment to Mr. Northey of $9,000
as a tax gross up for the stock issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We paid $50,000 to Bruce Thornton, our Executive
Vice President of International Operations and Sales. We also granted Mr. Thornton $12,500 in our common stock, or 2,599 shares
based on the closing price of our common stock of $4.81 on November 30, 2016. We also made an additional payment to Mr. Thornton
of $5,000 as a tax gross up for the stock issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>2017 Bonus Plan Structure for Executive
Officers</I>: </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.05in 0 0.25pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.5pt">On November 30, 2016,
our Compensation Committee approved our bonus plan for fiscal year 2017. The 2017 bonus plan covers bonuses earned through March
31, 2017. Pursuant to the 2017 bonus plan, our executive officers have the potential to earn an annual bonus based on the Compensation
Committee&rsquo;s assessment of the individual&rsquo;s performance towards target goals and milestones. Each executive officer&rsquo;s
performance is measured against three target goals which vary depending on that executive&rsquo;s role within the Company. Bonuses
will be paid in cash, options and/or shares of our common stock at the discretion of the Compensation Committee. Grants of common
stock include a 40% cash gross up to cover the executive&rsquo;s taxes as a result of the grant. The potential 2017 bonus for each
officer is:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Chief Executive Officer: $150,000</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Chief Financial Officer: $75,000</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Executive Vice Presidents: $62,500</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">President of IntraDerm&trade; Pharmaceuticals division: $125,000</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 69; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->67<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Equity Compensation Plan Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to Item 201(d) of Regulation S-K,
&ldquo;Securities Authorized for Issuance Under Equity Compensation Plans,&rdquo; we are providing the following information summarizing
information about our equity compensation plans as of March 31, 2016. All share numbers have been updated for the 1-for-5 reverse
stock split of the Company&rsquo;s common stock effective as of June 24, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 9.6pt 0 0.25pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: bottom; width: 26%; border: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Plan Category </B></FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 23%; border-top: black 1pt solid; border-right: black 1pt solid; border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Number of Securities<BR>
 to be issued <BR>
upon exercise
        of </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>outstanding options <BR>
and rights </B></P></TD>
    <TD STYLE="vertical-align: bottom; width: 19%; border-top: black 1pt solid; border-right: black 1pt solid; border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Weighted average <BR>
exercise price of </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 2.75pt 0 0; text-align: center"><B>outstanding </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>options and rights </B></P></TD>
    <TD STYLE="vertical-align: top; width: 32%; border-top: black 1pt solid; border-right: black 1pt solid; border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Number of Securities<BR>
 remaining available<BR>

        for future issuance under </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>equity compensation<BR>
 plans (excluding </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>securities reflected <BR>
in column (a)) </B></P></TD></TR>
<TR STYLE="background-color: rgb(204,204,204)">
    <TD STYLE="vertical-align: top; border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">Equity compensation plans <BR>
approved by security holders </FONT></TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">752,000</FONT></TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$21.47</FONT></TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">583,000</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">Equity compensation plans not<BR>
 approved by security holders </FONT></TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">-- </FONT></TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">-- </FONT></TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">-- </FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,204,204)">
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total</B></FONT></TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">752,000</FONT></TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$21.47</FONT></TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">583,000</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: -0.7pt">Our Amended and Restated
2006 Stock Incentive Plan and our 2011 Stock Incentive Plan were adopted with the approval of our stockholders, and we have previously
provided the material terms of such plans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25pt; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25pt; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 70; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->68<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Outstanding Equity Awards</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows grants of options
outstanding on March 31, 2016, the last day of our last completed fiscal year, to each of the Named Executive Officers named in
the Summary Compensation Table. All shares and per share data have been adjusted to reflect a 1-for-7 reverse stock split, effective
April 1, 2013 and a 1-for-5 reverse stock split, effective June 24, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="width: 11%; border: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt"><B><I>Name</I></B></FONT></TD>
    <TD STYLE="width: 11%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Grant Date</B></FONT></TD>
    <TD STYLE="width: 11%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Initial </B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Number</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>of </B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Securities</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Granted</B></FONT></TD>
    <TD STYLE="width: 17%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Equity </B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Incentive</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Plan&nbsp;&nbsp;Awards:</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Number of</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Securities</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Underlying</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Unexercised</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Unearned </B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Options (#)</B></FONT></TD>
    <TD STYLE="width: 9%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Option<BR>
        Exercise</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Price ($)</B></P></TD>
    <TD STYLE="width: 14%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><BR>
<FONT STYLE="font-size: 10pt"><B>Number of Securities</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Underlying</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Unexercised</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Options (#)</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Exercisable</B></FONT></TD>
    <TD STYLE="width: 14%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Number of</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Securities</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Underlying</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Unexercised </B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Options (#)</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Unexercisable</B></FONT></TD>
    <TD STYLE="width: 13%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Option</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Expiration</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Date</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD ROWSPAN="9" STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; background-color: white; text-align: right"><FONT STYLE="font-size: 10pt"><I>Jim Schutz (1)</I></FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">6/15/2007</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">2,856</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">$254.45</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">2,856</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">6/15/2017</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/10/2009</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5,271</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$38.15</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5,271</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/10/2019</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCCCCC">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2/10/2010</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3,571</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$66.85</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3,571</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2/10/2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6/7/2010</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1,785</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$68.95</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1,785</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6/7/2020</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCCCCC">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/31/2011</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3,928</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$70.35</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3,928</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/31/2021</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6/16/2011</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1,428</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$56.00</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1,428</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6/16/2021</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCCCCC">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/7/2012</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5,357</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$43.75</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5,357</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/7/2022</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">8/24/2012</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">4,285</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$32.55</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">4,285</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">8/24/2022</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCCCCC">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">9/19/2013</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">20,000</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$30.00</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">16,666</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3,334</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">9/19/2023</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD ROWSPAN="9" STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; background-color: white; text-align: right"><FONT STYLE="font-size: 10pt"><I>Robert Miller (2)</I></FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/10/2009</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5,271</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$38.15</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5,271</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/10/2019</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCCCCC">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6/7/2010</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5,357</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$68.95</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5,357</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6/7/2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/31/2011</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">357</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$70.35</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">357</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/31/2021</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCCCCC">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6/16/2011</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5,000</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$56.00</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5,000</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6/16/2021</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/7/2012</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1,785</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$105.00</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1,785</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/7/2022</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCCCCC">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">8/24/2012</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">4,285</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$32.55</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">4,285</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">8/24/2022</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">9/19/2013</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5,351</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$14.85</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">4,459</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">892</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">9/19/2023</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCCCCC">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/4/2014</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">26,020</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$19.50</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">17,346</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">8,674</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/4/2024</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">8/21/2015</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">8,000</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">88</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$5.80</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">7,912</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">8/21/2025</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD ROWSPAN="10" STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; background-color: white; text-align: right"><FONT STYLE="font-size: 10pt"><I>Bruce Thornton (3)</I></FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">6/15/2007</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">272</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">$254.45</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">272</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">6/15/2017</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6/15/2007</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">441</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$35.00</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">441</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6/15/2017</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCCCCC">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">12/9/2008</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5,428</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$14.00</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1,395*</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">12/9/2018</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6/7/2010</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1,428</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$68.95</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1,428</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6/7/2020</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCCCCC">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6/7/2010</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1,428</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$105.00</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1,428</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6/7/2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6/16/2011</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5,357</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$56.00</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5,357</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6/16/2021</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCCCCC">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/7/2012</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1,785</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$43.75</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1,785</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/7/2022</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">9/19/2013</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3,745</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$14.85</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3,121</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">624</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">9/19/2023</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCCCCC">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/4/2014</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">21,602</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$19.50</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">14,285</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">7,143</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/4/2024</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">8/21/2015</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">10,000</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">130</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$5.80</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">9,870</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">8/21/2025</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD ROWSPAN="7" STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; background-color: white; text-align: right"><FONT STYLE="font-size: 10pt"><I>Robert Northey (4)</I></FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">6/15/2007</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">964</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">$254.45</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">964</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; background-color: #CCCCCC; text-align: center"><FONT STYLE="font-size: 10pt">6/15/2017</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">12/9/2008</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2,857</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$29.75</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2,857</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">12/9/2018</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCCCCC">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2/25/2010</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2,571</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$64.05</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2,571</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2/25/2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5/17/2011</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3,142</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$66.15</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3,142</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5/17/2021</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCCCCC">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">9/19/2013</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3,745</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$14.85</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3,121</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">624</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">9/19/2023</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/4/2014</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">20,140</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$19.50</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">13,426</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">6,714</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3/4/2024</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCCCCC">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">8/21/2015</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">10,000</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">110</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">$5.80</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">9,890</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">8/21/2025</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 18.7pt; text-align: justify; text-indent: 0pt">*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,033 shares
were exercised.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5pt; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5pt; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5pt; text-indent: -0.5pt">&nbsp;</P>


<!-- Field: Page; Sequence: 71; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->69<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5pt; text-indent: -0.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(1)</TD><TD STYLE="text-align: justify; padding-right: 21.65pt">Options with an expiration date of September 19, 2023, will vest quarterly
over a three-year vesting schedule commencing on the date of grant. The options expiring on September 19, 2023, represent 1/3 of
the equity grant awarded to Mr. Schutz pursuant to our employment agreement with him effective June 20, 2013.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3in 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(2)</TD><TD STYLE="text-align: justify; padding-right: 0.3in">Options with an expiration date of March 4, 2024, will vest 1/36th per month
over a three-year vesting schedule commencing on the date of grant. Options with an expiration date of September 19, 2023, will
vest quarterly over a three-year vesting schedule commencing on the date of grant.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3in 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(3)</TD><TD STYLE="text-align: justify; padding-right: 0.3in">Options with an expiration date of September 19, 2023 or March 4, 2024, will
vest 1/36th per month over a three-year vesting schedule commencing on the date of grant.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3in 0 0.5in; text-align: justify; text-indent: -0.5in; background-color: white">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; background-color: white"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(4)</TD><TD STYLE="text-align: justify; padding-right: 0.3in">Options with an expiration date of September 19, 2023 or March 4, 2024, will
vest 1/36th per month over a three-year vesting schedule commencing on the date of grant.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: 0.5in">&nbsp; &nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Retirement Benefits</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.7pt; text-align: justify; text-indent: -0.7pt">On January 1,
2011, we established a qualified 401(k) employee savings and retirement plan for all regular full-time U.S. employees. Eligible
employees may elect to defer a percentage of their eligible compensation in the 401(k) plan, subject to the statutorily prescribed
annual limit. We may make matching contributions on behalf of all participants in the 401(k) plan in the amount equal to 4% of
an employee&rsquo;s contributions. All contributions are immediately fully vested. We intend the 401(k) plan to qualify under Sections
401(k) and 501 of the Internal Revenue Code of 1986, as amended, so that contributions by employees or us to the 401(k) plan and
income earned, if any, on plan contributions are not taxable to employees until withdrawn from the 401(k) plan (except as regards
Roth contributions), and so that we will be able to deduct our contributions when made. The trustee of the 401(k) plan, at the
direction of each participant, invests the assets of the 401(k) plan in any of a number of investment options. Company contributions
to the 401(k) plan amounted to an aggregate of $158,000 for the year ended March 31, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Code of Business Conduct and Senior Financial
Officers&rsquo; Code of Ethics</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 17, 2017, our board of directors
adopted changes to our code of conduct. The code of conduct governs the conduct of all our employees, directors and officers, including
our management. The changes to the code of conduct were made to update the code to current best practices. In addition to some
clerical changes, the code of conduct now explicitly requires employees, directors and officers to act honestly and ethically in
dealing with customers, business partners and others. Furthermore, the code of conduct now explicitly extends the confidentiality
and conflicts of interest requirements to directors and prohibits company loans. The code of conduct also updated the disclosure,
reporting and enforcement provisions. We filed our code of conduct with the Securities and Exchange Commission as exhibit 14.1 to the current
report on Form 8-K on January 23, 2017, and it is also available on our website at http://www.ir.sonomapharma.com/governance-documents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">To date, there have been no waivers under our
Code of Business Conduct. We intend to disclose future amendments to certain provisions of our Code of Business Conduct or any
waivers, if and when granted, of our Code of Business Conduct on our website at http://www.sonomapharma.com within four business
days following the date of such amendment or waiver.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 2pt; text-align: center; text-indent: -0.5pt"><FONT STYLE="text-transform: uppercase"><B><A NAME="a12"></A>Certain
Relationships AND Related Transactions</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">It is our policy that all employees, officers
and directors must avoid any activity that is, or has the appearance of, conflicting with the interests of our Company. This policy
is included in our Code of Business Conduct, and our Board formally adopted a Related Party Transaction Policy and Procedures in
July 2007 for the approval of interested transactions with persons who are Board members or nominees, executive officers, holders
of 5% of our common stock, or family members of any of the foregoing. The Related Party Transaction Policy and Procedures are administered
by our Audit Committee. We conduct a review of all related party transactions for potential conflict of interest situations on
an ongoing basis and all such transactions relating to executive officers and directors must be approved by the Audit Committee.
There have been no relevant related party transactions meeting the disclosure requirements in this period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Arrangements or Understandings between our
Executive Officers or Directors and Others </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">There are no arrangements or understandings
between our executive officers or directors and any other person pursuant to which he or she was or is to be selected as a director
or officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 72; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->70<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 2pt; text-align: center; text-indent: -0.5pt"><A NAME="a13"></A><FONT STYLE="text-transform: uppercase"><B>Security
Ownership of Certain Beneficial Owners and Management</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">The following
table sets forth certain information as of March 29, 2017, as to shares of our common stock beneficially owned by: (1) each of our
Named Executive Officers listed in the Summary Compensation Table, (2) each of our current directors and (3) all of our directors
and executive officers as a group. We currently do not know of any shareholder who beneficially owns 5% or more of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">We have
determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe,
based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment
power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">In computing
the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding
shares of common stock subject to options held by that person that are currently exercisable or exercisable upon vesting. We did
not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">Share
numbers have been adjusted for the 1-for-5 reverse stock split effective June 24, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Officers and Directors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 27pt; text-align: justify; text-indent: -27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 27pt; text-align: justify; text-indent: -27pt"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD ROWSPAN="2" STYLE="border: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Name and address </B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>of beneficial owner (1)</B></FONT></TD>
    <TD ROWSPAN="2" STYLE="border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Nature of beneficial ownership</B></FONT></TD>
    <TD COLSPAN="3" STYLE="border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Amount of Beneficial Ownership</B></FONT></TD>
    <TD ROWSPAN="2" STYLE="border-top: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Percent of</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Shares </B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Beneficially</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Owned (3)</B></FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Shares</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Owned</B></FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Shares &ndash; Includes </B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>all Rights</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>to </B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Acquire</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>(2)</B></FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total</B></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="width: 19%; border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Jim Schutz (4)</FONT></TD>
    <TD STYLE="width: 37%; border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Chief Executive Officer and Director</FONT></TD>
    <TD STYLE="width: 12%; border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">11,840</FONT></TD>
    <TD STYLE="width: 7%; border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">98,481</FONT></TD>
    <TD STYLE="width: 14%; border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">110,321</FONT></TD>
    <TD STYLE="width: 11%; border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2.5%</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Robert Miller (5)</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Secretary, Chief Financial Officer and Chief Operating Officer</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">24,428</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">111,338</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">135,766</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">3.1%</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Bruce Thornton (6)</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Executive Vice President of International Operations and Sales</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">2,599</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">47,343</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">49,942</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1.2%</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Robert Northey (7)</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Executive Vice President of Research and Development</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">4,678</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">43,289</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">47,967</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1.1%</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Marc Umscheid (8)</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Chief Strategy and Chief Marketing Officer</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">750</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">55,000</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">55,750</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1.3%</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Jerry McLaughlin (9)</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Lead Independent Director</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">11,225</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">29,224</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">40,449</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">*</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Sharon Barbari (10)</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Director</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">9,204</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">16,192</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">25,396</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">*</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Russell Harrison (11)</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Director</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">10,010</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">17,893</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">27,903</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">*</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Jay Birnbaum (12)</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt">Director</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">8,549</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">34,798</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">43,347</FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">1.0%</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD COLSPAN="2" STYLE="border-right: #A6A6A6 1pt solid; border-bottom: #A6A6A6 1pt solid; border-left: #A6A6A6 1pt solid"><FONT STYLE="font-size: 10pt"><B>All directors and executive officers as a group (9 persons)</B></FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>83,283</B></FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>453,558</B></FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>536,841</B></FONT></TD>
    <TD STYLE="border-bottom: #A6A6A6 1pt solid; border-right: #A6A6A6 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>11.3%</B></FONT></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 27pt; text-align: justify; text-indent: -27pt">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">*Indicates
ownership of less than 1.0%</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 21.65pt 0 0.5pt; text-align: justify; text-indent: -0.5pt">&nbsp;</P>


<!-- Field: Page; Sequence: 73; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->71<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(1)</TD><TD STYLE="text-align: justify; padding-right: 3.65pt">Unless otherwise stated, the address of each beneficial owner listed in
the table is c/o Sonoma Pharmaceuticals, Inc. 1129 North McDowell Blvd. Petaluma, CA 94954.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 3.65pt 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(2)</TD><TD STYLE="text-align: justify; padding-right: 3.65pt">Represents shares subject to outstanding stock options and warrants currently
exercisable or exercisable upon vesting.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(3)</TD><TD STYLE="text-align: justify"><P STYLE="margin: 0pt 0">We had a total of 4,289,222 shares of common stock issued and outstanding on March 29, 2017.</P>


</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(4)</TD><TD STYLE="text-align: justify">Mr. Schutz is our President and Chief Executive Officer. He is also a member of our Board of Directors.
Mr. Schutz beneficially owns 11,840 shares of common stock and 98,481 shares of common stock issuable upon the exercise of options.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(5)</TD><TD STYLE="text-align: justify">Mr. Miller is our Chief Financial Officer. Mr. Miller beneficially owns 24,428 shares of common stock, which includes 8,464
shares held by The Miller 2005 Grandchildren&rsquo;s Trust, for which Mr. Miller and his wife, Margaret
I. Miller, are the trustees. Mr. Miller and Ms. Miller share voting and dispositive control over the shares held by The Miller
2005 Grandchildren&rsquo;s Trust. Mr. Miller also beneficially owns 111,338 shares of common stock issuable upon the exercise of
options.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(6)</TD><TD STYLE="text-align: justify">Mr. Thornton is our Executive Vice President of International Operations and Sales. Mr. Thornton
beneficially owns 2,599 shares of common stock and 47,343 shares of common stock issuable upon the exercise of options.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(7)</TD><TD STYLE="text-align: justify">Mr. Northey is our Executive Vice President of Research and Development. He beneficially owns 4,678
shares of common stock and 43,289 shares of common stock issuable upon the exercise of options.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(8)</TD><TD STYLE="text-align: justify"><P STYLE="margin: 0pt 0">Mr. Umscheid is our Chief Strategy and Chief Marketing Officer. He beneficially owns 750 shares of common
stock and 55,000 shares of common stock issuable upon the exercise of options.</P>


</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(9)</TD><TD STYLE="text-align: justify">Mr. McLaughlin is a member of our Board of Directors and was appointed as Lead Independent Director
on March 26, 2014. He beneficially owns 11,225 shares of common stock and 29,224 shares of common stock issuable upon the exercise
of options.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(10)</TD><TD STYLE="text-align: justify">Ms. Barbari is a member of our Board of Directors. She beneficially owns 9,204 shares of common
stock held by The Barbari Family Trust &ndash; Sharon Ann Barbari and Edward Paul Barbari Trustees, and 16,192 shares of common
stock issuable upon the exercise of options.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(11)</TD><TD STYLE="text-align: justify">Mr. Harrison is a member of our Board of Directors. He beneficially owns 10,010 shares of common
stock and 17,893 shares of common stock issuable upon the exercise of options.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(12)</TD><TD STYLE="text-align: justify">Dr. Birnbaum is a member of our Board of Directors. He beneficially owns 8,549 shares of common
stock and 34,798 shares of common stock issuable upon the exercise of options.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 27pt; text-align: justify; text-indent: -27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 2pt; text-align: center; text-indent: -0.5pt"><B><A NAME="a14"></A>DESCRIPTION
OF SECURITIES </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The following description
of our capital stock and provisions of our Restated Certificate of Incorporation and our Amended and Restated Bylaws, is only a
summary. You should also refer to our Restated Certificate of Incorporation, and our Amended and Restated Bylaws, copies of which
are incorporated by reference as exhibits to the registration statement of which this prospectus is a part. All shares have been
adjusted for a 1-for-5 reverse stock split effective June 24, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B>Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Our Board of Directors
is authorized to issue 714,286 shares of preferred stock in one or more series and to fix the rights, preferences, privileges,
qualifications, limitations and restrictions thereof, including dividend rights and rates, conversion rights, voting rights, terms
of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of
such series, without any vote or action by our shareholders. Any preferred stock to be issued could rank prior to our common stock
with respect to dividend rights and rights on liquidation. Our Board of Directors, without shareholder approval, may issue preferred
stock with voting and conversion rights which could adversely affect the voting power of holders of our common stock and discourage,
delay or prevent a change in control of the Company. As of the date of this prospectus, no shares of preferred stock are outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>


<!-- Field: Page; Sequence: 74; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->72<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B>Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">We are authorized
to issue up to a total of 12,000,000 shares of common stock, $0.0001&nbsp;par value per share. Each holder of common stock is entitled
to one vote for each share of common stock held on all matters submitted to a vote of stockholders. We have not provided for cumulative
voting for the election of directors in our Restated Certificate of Incorporation, as amended. This means that the holders of a
majority of the shares voted can elect all of the directors then standing for election. Subject to preferences that may apply to
shares of preferred stock outstanding at the time, the holders of outstanding shares of our common stock are entitled to receive
dividends out of assets legally available at the times and in the amounts that our Board of Directors may determine from time to
time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Holders of common
stock have no preemptive subscription, redemption or conversion rights or other subscription rights. Upon our liquidation, dissolution
or&nbsp;winding-up,&nbsp;the holders of common stock are entitled to share in all assets remaining after payment of all liabilities
and the liquidation preferences of any outstanding preferred stock. Each outstanding share of common stock is, and all shares of
common stock to be issued in this offering, when they are paid for will be, fully paid and nonassessable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 24.5pt; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B>Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">In connection with
this offering, we issued warrants to purchase 937,500 shares of our common stock. For every five shares of common stock issued,
we issued 3.75 of a warrant. Each five full warrants are exercisable for one share of our common stock at an initial exercise price
of $6.50&nbsp;per share. The warrants are exercisable commencing upon consummation of this offering and terminating on the fifth
anniversary of the date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The warrants were
issued in registered form under a warrant agreement between us and our warrant agent. The material provisions of the warrants are
set forth herein but are only a summary and are qualified in their entirety by the provisions of the warrant agreement that has
been filed as an exhibit to the registration statement of which this prospectus forms a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The warrants may be exercised upon surrender
of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the
reverse side of the public warrant certificate completed and executed as indicated, accompanied by full payment of the exercise
price, by certified or official bank check payable to us, for the number of warrants being exercised. Under the terms of the warrant
agreement, we have agreed to use our best efforts to maintain the effectiveness of the registration statement and current prospectus
relating to common stock issuable upon exercise of the warrants until the expiration of the warrants. During any period we fail
to have maintained an effective registration statement covering the shares underlying the warrants, the warrant holder may exercise
the warrants on a cashless basis. The warrant holders do not have the rights or privileges of holders of common stock and any voting
rights until they exercise their warrants and receive shares of common stock. After the issuance of shares of common stock upon
exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on
by stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">No fractional shares of common stock will be
issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest
in a share, we, at our sole discretion may, upon exercise, either round up to the nearest whole number of shares of common stock
to be issued to the warrant holder or pay a cash adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the price per share at which shares of common stock may be purchased at the time a warrant is exercised. If multiple
warrants are exercised by the holder at the same time, we will aggregate the number of whole shares issuable upon exercise of all
the warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The exercise price and number of shares of
common stock issuable upon exercise of the warrants may be adjusted in certain circumstances, including in the event of a stock
dividend, extraordinary dividend on or recapitalization, reorganization, merger or consolidation. However, the warrants will not
be adjusted for issuances of common stock at a price below their respective exercise prices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Representative&rsquo;s Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We granted to Maxim Group LLC, the representative
of the underwriters, warrants to purchase a number of shares of common stock equal to 5.0% of the total number of shares of common
stock sold in this offering at a price equal to 110% of the price per share of the common stock sold in this offering. The warrants
are not redeemable and have substantially similar terms as those warrants sold to purchasers in the offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>


<!-- Field: Page; Sequence: 75; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->73<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><A NAME="a15"></A> <B>UNDERWRITING</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">We entered into an
underwriting agreement with Maxim Group LLC acting as the sole book-running manager and sole representative for the underwriters
named below. Subject to the terms and conditions of the underwriting agreement, the underwriters named below agreed to purchase,
and we agreed to sell to them, the number of shares of common stock and warrants to purchase common stock at the public offering
price, less the underwriting discounts and commissions, as set forth on the cover page of this prospectus and as indicated below
(adjusted for the 1-for-5 reverse stock split effective June 24, 2016):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 50%; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Underwriter</B></FONT></TD>
    <TD STYLE="width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="width: 47%; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt"><B>Number of Shares</B></FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #EEEEEE">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Maxim Group LLC</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">625,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Dawson James Securities, Inc.</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">625,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #EEEEEE">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Total </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,250,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The underwriting agreement
provides that the obligations of the underwriters to pay for and accept delivery of the shares and warrants that were offered by
this prospectus are subject to the approval of certain legal matters by their counsel and to other conditions. The underwriters
are obligated to take and pay for all of the shares and warrants offered by this prospectus if any such shares and warrants are
taken, other than those shares and warrants covered by the over-allotment option described below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B>Over-Allotment
Option</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">We granted to the
underwriters an option, exercisable no later than 45 calendar days after the date of the underwriting agreement to purchase 187,500
<FONT STYLE="background-color: white">additional shares of common stock at a price, after the underwriting discount, of $4.554
per five shares, and/or </FONT>703,125 <FONT STYLE="background-color: white">warrants to purchase&nbsp;140,625 shares of common
stock at a price, after the underwriting discount, of $0.046 per 3.75 warrants from us to cover over-allotments. On January 21,
2015, the underwriters exercised their over-allotment option with respect to 703,125 warrants. On March 4, 2015, the underwriters
exercised their over-allotment option with respect to 26,900 shares of common stock.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B><A NAME="a29"></A>Commissions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">We agreed to pay the
underwriters (i) a cash fee equal to 8% of the aggregate gross proceeds raised in this offering and (ii) warrants to purchase that
number of shares of our common stock equal to&nbsp;an aggregate of 5% of the shares of common stock sold in the offering (or 71,875
shares, assuming the over-allotment option is fully exercised). Such underwriters&rsquo; warrants shall have an exercise price
equal to&nbsp;$5.50 per share, which is 110% of the public offering price, terminate five years after the effective date of the
registration statement of which this prospectus forms a part, and otherwise have the same terms as the warrants sold in this offering
except that (1) they will not be subject to redemption by the Company and (2)&nbsp;they will provide for limited &ldquo;piggyback&rdquo;
registration rights with respect to the underlying shares during the three year period commencing six months after the effective
date of this offering in the event we fail to keep the registration statement, of which this prospectus forms a part, current.
Such underwriters&rsquo; warrants will be subject to FINRA Rule 5110(g)(1) in that, except as otherwise permitted by FINRA rules,
for a period of 180 days following the effective date of the registration statement, of which this prospectus forms a part, the
underwriters&rsquo; warrants shall not be (A) sold, transferred, assigned, pledged, or hypothecated, or (B) the subject of any
hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities
by any person.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The representative
has advised us that the underwriters propose to offer the shares and warrants directly to the public at the public offering price
set forth on the cover of this prospectus. In addition, the representative may offer some of the shares and warrants to other securities
dealers at such price less a concession of up to $0.1875 per share. After the offering to the public, the offering price and other
selling terms may be changed by the representative without changing the Company&rsquo;s proceeds from the underwriters&rsquo; purchase
of the shares and warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>


<!-- Field: Page; Sequence: 76; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->74<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The following table
summarizes the public offering price per share and per warrant, underwriting commissions and proceeds before expenses to us assuming
both no exercise and full exercise of the underwriters&rsquo; option to purchase additional shares and warrants. The underwriting
commissions are equal to the public offering price per share less the amount per share the underwriters pay us for the shares and
warrants. All numbers have been adjusted for a 1 &ndash; for &ndash; 5 reverse stock split effective June 24, 2016.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Per</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>5 Shares</B></FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Per 3.75 </B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>of a </B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Warrant (1)</B></FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total <BR>
Without</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Over-Allotment</B></FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total<BR>
 Assuming</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Full</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Over-Allotment</B></FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #F2F2F2">
    <TD STYLE="vertical-align: top; width: 45%"><FONT STYLE="font-size: 10pt">Public Offering price</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">4.95</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">0.05</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">6,250,000</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">7,187,500</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Underwriting discounts and commissions (2)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">0.0396</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">0.004</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">500,000</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">575,000</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="background-color: #F2F2F2">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Proceeds, before expenses, to us</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">4.554</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">0.046</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">5,750,000</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">6,612,500</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="background-color: Transparent">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 48px"><FONT STYLE="font-size: 10pt">(1) </FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Five shares of common stock were sold together with 3.75 of a warrant, with each five full warrants being exercisable for the purchase of one share of common stock.</FONT></TD></TR>
<TR STYLE="background-color: Transparent">
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">(2)</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">The fees shown do not include the warrant to purchase shares of common stock issuable to the underwriters at closing.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">We estimate that the
total expenses of the offering, including registration, filing and listing fees, printing fees and legal and accounting expenses,
but excluding underwriting discounts and commissions, were approximately $485,000, all of which are payable by us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B>Lock-Up Agreements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">We and each of our
officers and directors aggregating approximately 0.4% of our outstanding shares have agreed, subject to certain exceptions, not
to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any shares of our common
stock or other securities convertible into or exercisable or exchangeable for shares of our common stock for a period of six months
after the effective date of the registration statement of which this prospectus is a part without the prior written consent of
Maxim Group LLC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Maxim may in its sole
discretion and at any time without notice release some or all of the shares subject to lock-up agreements prior to the expiration
of the lock-up period. When determining whether or not to release shares from the lock-up agreements, the representative will consider,
among other factors, the security holder&rsquo;s reasons for requesting the release, the number of shares for which the release
is being requested and market conditions at the time.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B>Price Stabilization,
Short Positions and Penalty Bids</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">In connection with
this offering, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of our common
stock. Specifically, the underwriters may over-allot in connection with this offering by selling more shares and warrants than
are set forth on the cover page of this prospectus. This creates a short position in our common stock for its own account. The
short position may be either a covered short position or a naked short position. In a covered short position, the number of shares
common stock or warrants over-allotted by the underwriters is not greater than the number of shares of common stock or warrants
that they may purchase in the over-allotment option. In a naked short position, the number of shares of common stock or warrants
involved is greater than the number of shares common stock or warrants in the over-allotment option. To close out a short position,
the underwriters may elect to exercise all or part of the over-allotment option. The underwriters may also elect to stabilize the
price of our common stock and/or warrants, or reduce any short position by bidding for, and purchasing, common stock and/or warrants&nbsp;in
the open market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The underwriters may
also impose a penalty bid. This occurs when a particular underwriter or dealer repays selling concessions allowed to it for distributing
a security in this offering because the underwriter repurchases that security in stabilizing or short covering transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>


<!-- Field: Page; Sequence: 77; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->75<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Finally, the underwriters
may bid for, and purchase, shares of our common stock in market making transactions, including &ldquo;passive&rdquo; market making
transactions as described below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">These activities may
stabilize or maintain the market price of our common stock at a price that is higher than the price that might otherwise exist
in the absence of these activities. The underwriters are not required to engage in these activities, and may discontinue any of
these activities at any time without notice. These transactions may be effected on NASDAQ, in the over-the-counter market, or otherwise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">In connection with
this offering, the underwriters and selling group members, if any, or their affiliates may engage in passive market making transactions
in our common stock immediately prior to the commencement of sales in this offering, in accordance with Rule 103 of Regulation
M under the Exchange Act. Rule 103 generally provides that:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 5%; text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; width: 90%; text-align: justify"><FONT STYLE="font-size: 10pt">a passive market maker may not effect transactions or display bids for our common stock in excess of the highest independent bid price by persons who are not passive market makers;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white"><I>&nbsp;</I></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 5%; text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; width: 90%; text-align: justify"><FONT STYLE="font-size: 10pt">net purchases by a passive market maker on each day are generally limited to 30% of the passive market maker&rsquo;s average daily trading volume in our common stock during a specified two-month prior period or 200 shares, whichever is greater, and must be discontinued when that limit is reached; and </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 5%; text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; width: 90%; text-align: justify"><FONT STYLE="font-size: 10pt">passive market making bids must be identified as such.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B><A NAME="a28"></A>Other Terms</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">We agreed to bear
the cost of all actual expenses related to the offering, including, without limitation, all filing fees and communication expenses
relating to the registration of the shares to be sold in the offering. We provided Maxim Group LLC an advance of $25,000 for its
anticipated out-of-pocket accountable expenses and will provide an additional advance of $25,000 upon written request by Maxim
Group LLC which shall also be applied to its anticipated out-of-pocket expenses, for aggregate advances of $50,000. Maxim Group
LLC will reimburse us for any remaining portion of the advance to the extent such monies were not used for out-of-pocket accountable
expenses actually incurred if this offering is not completed. If this offering is completed, we will reimburse Maxim Group LLC
for certain out-of-pocket actual expenses related to the offering, including legal fees and expenses incurred to clear the offering
with FINRA, including background searches of our officers and directors and roadshow expenses, up to a maximum aggregate reimbursable
amount of $125,000 (of which $100,000 can be allocated to legal expenses and $25,000 for non-legal expenses). In addition, we will
be responsible for the costs and expenses of &ldquo;tombstone&rdquo; advertisements not to exceed $5,000 and commemorative lucite
memorabilia valued up to $1,500.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We granted Maxim Group LLC a right of first
refusal for future public and private financings (excluding (i) at-the-market offerings, (ii) funding from a strategic investor,
or (iii) equity issued to purchase business assets or to acquire a strategic company) for a period of 12 months from January 20,
2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Pulmatrix/Ruthigen Transaction </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 23, June 16 and 17, 2015, we closed
the sale of our shares in Pulmatrix (formerly Ruthigen) to several investors for an aggregate purchase price of $5.5 million upon
the merger of Ruthigen with Pulmatrix, Inc. We agreed to pay Dawson James Securities, Inc. a cash fee in the amount of $200,000.
This fee will not be deemed an Item of Value under FINRA Rule 5110(c) and will not be included in the aggregate underwriting compensation
for this offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B>Indemnification</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">We have agreed to
indemnify the underwriters against liabilities relating to the offering arising under the Securities Act and the Exchange Act,
liabilities arising from breaches of some or all of the representations and warranties contained in the underwriting agreement,
and to contribute to payments that the underwriters may be required to make for these liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>


<!-- Field: Page; Sequence: 78; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->76<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B>Electronic Distribution</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">A prospectus in electronic
format may be made available on a website maintained by the representatives of the underwriters and may also be made available
on a website maintained by other underwriters. The underwriters may agree to allocate a number of shares to underwriters for sale
to their online brokerage account holders. Internet distributions will be allocated by the representatives of the underwriters
to underwriters that may make Internet distributions on the same basis as other allocations. In connection with the offering, the
underwriters or syndicate members may distribute prospectuses electronically. No forms of electronic prospectus other than prospectuses
that are printable as Adobe&reg; PDF will be used in connection with this offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The underwriters have
informed us that they do not expect to confirm sales of shares and warrants offered by this prospectus to accounts over which they
exercise discretionary authority.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Other than the prospectus
in electronic format, the information on any underwriter&rsquo;s website and any information contained in any other website maintained
by an underwriter is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been
approved and/or endorsed by us or any underwriter in its capacity as underwriter and should not be relied upon by investors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 2pt; text-align: center; text-indent: -0.5pt"><A NAME="a16"></A><FONT STYLE="text-transform: uppercase"><B>LEGAL
MATTERS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 2pt; text-align: center; text-indent: -0.5pt"><FONT STYLE="text-transform: uppercase">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; background-color: white">Trombly
Business Law, PC passed upon the validity of the securities offered hereby. Certain legal matters in connection with this offering
were passed upon for the underwriters by Ellenoff Grossman &amp; Schole LLP.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"> <FONT STYLE="text-transform: uppercase"><A NAME="a17"></A><B>EXPERTS</B></FONT></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 2.3pt; text-align: center; text-indent: -0.5pt"><FONT STYLE="text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.6pt; text-align: justify; background-color: white">The consolidated
financial statements as of and for the years ended March 31, 2016 and 2015 included in this Registration Statement have been so
included in reliance on the report, which includes an explanatory paragraph as to the Company&rsquo;s ability to continue as a
going concern, of Marcum LLP, an independent registered public accounting firm, appearing elsewhere herein and in the Registration
Statement, given on the authority of said firm as experts in auditing and accounting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.6pt; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 2.6pt; text-align: center; text-indent: -0.5pt"><FONT STYLE="text-transform: uppercase"><A NAME="a18"></A><B>INTERESTS
OF NAMED EXPERTS AND COUNSEL</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">No expert or counsel
named in this registration statement as having prepared or certified any part of this registration statement or having given an
opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or
offering of the common stock was employed for such purpose on a contingency basis, or had, or is to receive, in connection with
this offering, a substantial interest, direct or indirect, in us or any of our parents or subsidiaries, nor was any such person
connected with us or any of our parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director,
officer, or employee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: center; text-indent: 0.5in; background-color: white"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 2.9pt; text-align: center; text-indent: -0.5pt"><FONT STYLE="text-transform: uppercase"><B><A NAME="a19"></A>WHERE
YOU CAN FIND MORE INFORMATION</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 2.9pt; text-align: center; text-indent: -0.5pt"><FONT STYLE="text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify">We have filed with the Securities
and Exchange Commission, Washington, D.C., 20549, under the Securities Act of 1933, a registration statement on Form S-1 relating
to the securities offered hereby. This prospectus does not contain all of the information set forth in the registration statement
and the exhibits and schedules thereto. For further information with respect to our company and the securities we are offering
by this prospectus you should refer to the registration statement, including the exhibits and schedules thereto. You may inspect
a copy of the registration statement without charge at the Public Reference Section of the Securities and Exchange Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference
Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission also maintains
an Internet site that contains reports, proxy and information statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission. The Securities and Exchange Commission's World Wide Web address is
http://www.sec.gov.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 79; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->77<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify">We file periodic reports, proxy statements
and other information with the Securities and Exchange Commission in accordance with requirements of the Exchange Act. These periodic
reports, proxy statements and other information are available for inspection and copying at the regional offices, public reference
facilities and Internet site of the Securities and Exchange Commission referred to above. In addition, you may request a copy of
any of our periodic reports filed with the Securities and Exchange Commission at no cost, by writing or telephoning us at the following
address:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Investor Relations</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Sonoma Pharmaceuticals, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">1129 N. McDowell Blvd.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Petaluma, CA 94954</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">(707) 283-0550</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Investors and others should note that we announce
material financial information using our company website: www.sonomapharma.com, our investor relations website: ir.sonomapharma.com,
SEC filings, press releases, public conference calls and webcasts. The information on or accessible through our websites is not
incorporated by reference in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify">You should rely only on the information
contained in or incorporated by reference or provided in this prospectus or any supplement to this prospectus. We have not authorized
anyone else to provide you with different information. We are not making an offer of these securities in any state where the offer
is not permitted. You should not assume the information in this prospectus is accurate as of any date other than the date on the
front of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.3pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 3.2pt; text-align: center; text-indent: -0.5pt"><FONT STYLE="text-transform: uppercase"><B><A NAME="a20"></A>DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt 0 3.2pt; text-align: center; text-indent: -0.5pt"><FONT STYLE="text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to our directors, officers, or persons controlling our Company pursuant to the
foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities Act and is therefore unenforceable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 80; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->78<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Sonoma Pharmaceuticals, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><A NAME="a21"></A><B>Index to Consolidated Financial Statements</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 94%; padding-left: 10pt; text-indent: -10pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 20pt; text-indent: -20pt">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 20pt; text-indent: -20pt">&nbsp;</P></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 5%; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Page</B></FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><A HREF="#a22"><FONT STYLE="font-size: 10pt">Report of Independent Registered Public Accounting Firm</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">F-2</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><A HREF="#a23"><FONT STYLE="font-size: 10pt">Consolidated Balance Sheets as of March&nbsp;31, 2016 and 2015</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">F-3</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><A HREF="#a24"><FONT STYLE="font-size: 10pt">Consolidated Statements of Comprehensive (Loss) Income for the years ended March&nbsp;31, 2016 and 2015</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">F-4</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><A HREF="#a25"><FONT STYLE="font-size: 10pt">Consolidated Statements of Changes in Stockholders&rsquo; Equity for the years ended March&nbsp;31, 2016 and 2015</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">F-5</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><A HREF="#a26"><FONT STYLE="font-size: 10pt">Consolidated Statements of Cash Flows for the years ended March&nbsp;31, 2016 and 2015</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">F-6</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><A HREF="#a27"><FONT STYLE="font-size: 10pt">Notes to Consolidated Financial Statements</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">F-7</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><A HREF="#a_003"><FONT STYLE="font-size: 10pt">Consolidated Balance Sheets as of December 31, 2016 and March 31, 2016</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">F-26</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><A HREF="#a_004"><FONT STYLE="font-size: 10pt">Consolidated Statements of Comprehensive (Loss) Income for the quarters and nine months ended December 31, 2016 and 2015</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">F-27</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><A HREF="#a_005"><FONT STYLE="font-size: 10pt">Consolidated Statements of Cash Flows for the nine months ended December 31, 2016 and 2015</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">F-28</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><A HREF="#a_006"><FONT STYLE="font-size: 10pt">Notes to Consolidated Financial Statements</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">F-29</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>


<!-- Field: Page; Sequence: 81; Options: NewSection; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><A NAME="a22"></A><U>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">To the Audit Committee of the</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Board of Directors and Shareholders</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">of Oculus Innovative Sciences, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have audited the accompanying consolidated
balance sheets of Oculus Innovative Sciences, Inc. and Subsidiaries (the &ldquo;Company&rdquo;) as of March 31, 2016 and 2015,
and the related consolidated statements of comprehensive loss, changes in stockholders&rsquo; equity and cash flows for the years
then ended. These financial statements are the responsibility of the Company&rsquo;s management. Our responsibility is to express
an opinion on these financial statements based on our audits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States).&nbsp;Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company&rsquo;s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation.&nbsp;We believe that our audits provide
a reasonable basis for our opinion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In our opinion, the financial statements referred
to above present fairly, in all material respects, the consolidated financial position of Oculus Innovative Sciences, Inc. and
Subsidiaries, as of March 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted in the United States of America.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. As more fully discussed in Note 2, the Company has incurred
significant net losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions
raise substantial doubt about the Company&rsquo;s ability to continue as a going concern. Management&rsquo;s plans with regard
to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the
outcome of this uncertainty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">/s/ Marcum LLP</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Marcum LLP</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">New York, NY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">June 21, 2016</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 82; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="a23"></A>CONSOLIDATED BALANCE SHEETS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">March 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 20pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">(In thousands, except share<BR> and per share amounts)</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: center">ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Current assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left; padding-left: 20pt; text-indent: -10pt">Cash and cash equivalents</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">7,469</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">6,136</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Accounts receivable, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,274</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,517</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Inventories, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,640</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,402</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Prepaid expenses and other current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,505</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">592</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Total current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,888</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,647</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Property and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">850</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">795</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Long-term investment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,538</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Other assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">65</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">68</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Total assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">13,803</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">15,048</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: center">LIABILITIES AND STOCKHOLDERS&rsquo; EQUITY</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Current liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,337</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">932</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Accrued expenses and other current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,526</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">782</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Deferred revenue</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">574</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">769</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Current portion of long-term debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">114</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">87</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Derivative liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">11</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Total current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,551</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,581</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Deferred revenue, less current portion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">112</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">413</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Total liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,663</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,994</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Commitments and Contingencies (Note 12)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Stockholders&rsquo; Equity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Convertible preferred stock, $0.0001 par value; 714,286 shares authorized, none issued and outstanding at March 31, 2016 and March 31, 2015, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Common stock, $0.0001 par value; 60,000,000 shares authorized at March 31, 2016 and March 31, 2015,  20,984,369 and 15,045,080 shares issued and outstanding at March 31, 2016 and March 31, 2015, respectively (Note 13)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">166,367</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">157,772</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Accumulated deficit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(152,375</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(142,213</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Accumulated other comprehensive loss</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,854</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,507</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Total stockholders&rsquo; equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,140</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,054</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Total liabilities and stockholders&rsquo; equity</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">13,803</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">15,048</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0; text-align: center">The accompanying footnotes are an integral part
of these consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0; text-align: center"></P>

<!-- Field: Page; Sequence: 83; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->3<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0; text-align: center"><B>SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0; text-align: center"><A NAME="a24"></A><B>CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;Ended&nbsp;March&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">(In&nbsp;thousands, except<BR> per share amounts)</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Revenues</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; padding-left: 20pt; text-indent: -10pt">Product</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">13,042</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">9,939</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Product licensing fees and royalties</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">981</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,056</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Service</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,061</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">859</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 30pt; text-indent: -10pt">Total revenues</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">15,084</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">13,854</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Cost of revenues</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Product</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,993</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,908</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Service</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">881</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">658</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 30pt; text-indent: -10pt">Total cost of revenues</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,874</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,566</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Gross profit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,210</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,288</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Operating expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Research and development</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,806</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,533</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Selling, general and administrative</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">15,556</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,414</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 30pt; text-indent: -10pt">Total operating expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">17,362</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">13,947</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Loss from operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(10,152</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,659</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Interest expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Interest income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Gain due to change in fair value of derivative liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,164</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Impairment loss on long-term investment (See Note 3)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,650</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Other expense, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(20</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(56</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Net loss</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(10,162</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(8,203</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Net loss per common share: basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.62</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.85</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Weighted-average number of shares used in per common share calculations:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 20pt; text-indent: -10pt">Basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">16,444</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">9,657</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Other comprehensive loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Net loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(10,162</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(8,203</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Foreign currency translation adjustments</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(347</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(438</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 20pt; text-indent: -10pt">Comprehensive loss</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(10,509</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(8,641</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0; text-align: center">The accompanying footnotes are an integral part
of these consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0; text-align: center"></P>

<!-- Field: Page; Sequence: 84; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0; text-align: center"><B>SONOMA PHARMACEUTICALS, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0; text-align: center"><B><A NAME="a25"></A>CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS&rsquo;
EQUITY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0; text-align: center"><B>For the Years Ended March 31, 2016 and 2015</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0; text-align: center"><B>(In thousands, except share amounts)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Common Stock<BR> ($0.0001 par Value)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Additional<BR> Paid in</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Accumulated</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Accumulated Other Comprehensive</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Capital</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Deficit</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Loss</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 28%; padding-left: 10pt; text-indent: -10pt">Balance, March 31, 2014</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">8,160,145</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">149,141</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">(134,010</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">(3,069</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">12,063</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock in connection with At-the-Market issuances of common stock, net of commissions, expenses and other offering costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">467,934</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,341</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,341</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock and common stock purchase warrants in connection with January 26, 2015 closing of offering, net of commissions, expenses and other offering costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,384,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,443</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,444</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock for settlement of service fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">32,501</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">76</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">76</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Stock based compensation expense, net of forfeitures</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,771</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,771</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Foreign currency translation adjustment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(438</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(438</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Net loss</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(8,203</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(8,203</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Balance, March 31, 2015</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,045,080</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">157,772</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(142,213</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,507</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,054</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock in connection with At-the-Market issuances of common stock, net of commissions, expenses and other offering costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,254,596</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,150</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,150</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock and common stock purchase warrants in connection with March 23, 2016 closing of offering, net of commissions, expenses and other offering costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,400,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,994</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,994</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock upon exercise of common stock purchase warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,100</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock for settlement of service fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">208,519</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">286</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">286</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock in connection with Board Compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">65,074</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">64</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">64</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock purchase warrants for payment of service fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">128</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">128</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Stock based compensation, net of forfeitures</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,959</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,959</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Foreign currency translation adjustment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(347</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(347</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Net loss</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(10,162</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(10,162</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">Balance, March 31, 2016</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">20,984,369</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">166,367</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(152,375</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,854</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,140</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">The accompanying footnotes are an integral part
of these consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"></P>

<!-- Field: Page; Sequence: 85; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">&nbsp;</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><B>SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><A NAME="a26"></A><B>CONSOLIDATED STATEMENTS
OF CASH FLOWS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;Ended&nbsp;March&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">(In&nbsp;thousands)</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 10pt; text-indent: -10pt">Cash flows from operating activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; text-align: left; padding-left: 10pt; text-indent: -10pt">Net loss</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(10,162</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(8,203</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Adjustments to reconcile net loss to net cash used in operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Depreciation and amortization</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">244</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">253</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Change in provision for doubtful accounts</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">29</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Change in provision for discounts, rebates, distributor fees and returns</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">470</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">183</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Change in provision for obsolete inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">77</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">141</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Stock-based compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,341</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,771</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt"> Change in fair value of derivative liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(11</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,164</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Impairment loss on long-term investment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,650</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Foreign currency transaction (gain) loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(38</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Gain on disposal of property and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(13</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Changes in operating assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,282</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(143</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Due from affiliate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">537</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Inventories</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(382</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(627</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Prepaid expenses and other current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(751</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">162</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">429</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">222</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Accrued expenses and other current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">919</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Deferred revenue and other liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(595</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,515</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Net cash used in operating activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(8,746</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(6,694</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 10pt; text-indent: -10pt">Cash flows from investing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Purchases of property and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(345</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(139</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Proceeds from sale of long-term investment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,538</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">963</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Long-term deposits</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">51</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Net cash provided by investing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,191</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">875</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 10pt; text-indent: -10pt">Cash flows from financing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Proceeds from issuance of common stock and common stock purchase warrants in offerings, net of offering costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,144</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,785</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Proceeds from issuance of common stock upon exercise of stock options and warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Principal payments on long-term debt</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(119</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(176</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Net cash provided by financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,039</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,609</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Effect of exchange rate on cash and cash equivalents</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(151</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(134</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Net increase in cash and cash equivalents</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,333</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">656</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Cash and cash equivalents, beginning of year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,136</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,480</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">Cash and cash equivalents, end of year</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,469</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,136</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 10pt; text-indent: -10pt">Supplemental disclosure of cash flow information:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Cash paid for interest</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 10pt; text-indent: -10pt">Non-cash operating and financing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Insurance premiums financed</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">146</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">116</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Issuance of common stock to settle obligations</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">96</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">76</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">The accompanying footnotes are an integral part
of these consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">&nbsp;</P>

<!-- Field: Page; Sequence: 86; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><B>SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><A NAME="a27"></A><B>NOTES&nbsp;TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE&nbsp;1&nbsp;&ndash; Organization and
Recent Developments</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Organization</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Oculus Innovative Sciences, Inc. (the &ldquo;Company&rdquo;)
was incorporated under the laws of the State of California in April 1999 and was reincorporated under the laws of the State of
Delaware in December 2006. The Company&rsquo;s principal office is located in Petaluma, California. The Company is a specialty
pharmaceutical company that develops and markets solutions for the treatment of dermatological conditions and advanced tissue care.
The Company&rsquo;s products, which are sold throughout the United States and 39 countries around the world, have improved patient
outcomes for more than five million patients globally by reducing infections, itch, pain, scarring, odor and harmful inflammatory
responses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE&nbsp;2&nbsp;&ndash; Liquidity and Financial
Condition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company reported a net loss of $10,162,000
for the year ended March 31, 2016. At March 31, 2016 and March 31, 2015, the Company&rsquo;s accumulated deficit amounted to $152,375,000
and $142,213,000, respectively. The Company had working capital of $9,337,000 and $7,066,000 as of March 31, 2016 and March 31,
2015, respectively. The Company expects to continue incurring losses for the foreseeable future and may need to raise additional
capital to pursue its product development initiatives, penetrate markets for the sale of its products and continue as a going concern.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 18, 2016, the Company entered
into an underwriting agreement with Dawson James Securities, Inc. with respect to the issuance and sale of an aggregate of
3,400,000 units, each unit consisting of one share of common stock, par value $0.0001 per share, together with one quarter or
25% of one warrant to purchase one share of common stock at an exercise price equal to $1.00 per share, in an underwritten
public offering. The public offering price for each unit, consisting of one share of common stock together with one quarter
or 25% of one warrant, was $1.00. Because the Company is prohibited from issuing fractional shares, the warrants can only be
exercised in lots of four, which means that each holder must exercise four March 2016 Warrants to receive one share of common
stock, or a total of 850,000 shares. The warrants have an initial exercise price of $1.00 per share and have a term of three
years. Pursuant to the underwriting agreement, the Company paid Dawson James Securities, Inc. a cash fee equal to 8% of the
aggregate gross proceeds raised in this offering and also paid $50,000 in legal fees and expenses of the underwriter&rsquo;s
legal counsel. The gross proceeds from the sale of the shares of common stock and the warrants were $3,400,000, and net
proceeds were $2,994,000 after deducting underwriting commissions and other estimated offering expenses. We also issued
warrants to purchase up to 250,000 shares of our common stock to Dawson James Securities, Inc. related to a service
agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to an At-the-Market Issuance
Sales Agreement with MLV &amp; Co. LLC dated April 2, 2014, the Company may issue and sell shares of common stock having an
aggregate offering price of up to $9,159,000 from time to time through MLV acting as the Company&rsquo;s sales agent. To
date, the Company has raised an aggregate $4,706,000 in connection with this agreement. During the year ended March 31, 2016,
the Company sold 2,254,596 shares of common stock for gross proceeds of $3,263,000 and net proceeds of $3,150,000 after
deducting commissions and other offering expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Management believes that the Company has access
to additional capital resources through possible public or private equity offerings, debt financings, corporate collaborations
or other means; however, the Company cannot provide any assurance that other new financings will be available on commercially acceptable
terms, if needed. If the economic climate in the U.S. deteriorates, the Company&rsquo;s ability to raise additional capital could
be negatively impacted. If the Company is unable to secure additional capital, it may be required to curtail its research and development
initiatives and take additional measures to reduce costs in order to conserve its cash in amounts sufficient to sustain operations
and meet its obligations. These measures could cause significant delays in the Company&rsquo;s efforts to commercialize its products,
which is critical to the realization of its business plan and the future operations of the Company. These matters raise substantial
doubt about the Company&rsquo;s ability to continue as a going concern. The accompanying consolidated financial statements
do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE&nbsp;3&nbsp;&ndash; Summary of Significant Accounting Policies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Principles of Consolidation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries, Aquamed Technologies, Inc. (&ldquo;Aquamed&rdquo;), Oculus
Technologies of Mexico S.A. de C.V. (&ldquo;OTM&rdquo;), and Oculus Innovative Sciences Netherlands, B.V. (&ldquo;OIS Europe&rdquo;).
Aquamed has no current operations. All significant intercompany accounts and transactions have been eliminated in consolidation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 87; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Use of Estimates</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the dates
of the  consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from these estimates. Significant estimates and assumptions include reserves and write-downs related
to receivables and inventories, the recoverability of long-lived assets, the valuation allowance relating to the Company&rsquo;s
deferred tax assets, valuation of equity and derivative instruments, and the estimated amortization periods of upfront product
licensing fees received from customers. Periodically, the Company evaluates and adjusts estimates accordingly.</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Reclassifications</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Certain prior period amounts have been reclassified
for comparative purposes to conform to the fiscal 2016 presentation. These reclassifications have no impact on the Company&rsquo;s
previously reported net loss.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Revenue Recognition and Accounts Receivable</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company generates revenue from sales of
its products to a customer base including hospitals, medical centers, doctors, pharmacies, distributors and wholesalers. The Company
sells products directly to end users and to distributors. The Company also entered into agreements to license its technology and
products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company also provides regulatory compliance
testing and quality assurance services to medical device and pharmaceutical companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company records revenue when (i)&nbsp;persuasive
evidence of an arrangement exists, (ii)&nbsp;delivery has occurred, (iii)&nbsp;the fee is fixed or determinable, and (iv)&nbsp;collectability
of the sale is reasonably assured.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company requires all product sales to be
supported by evidence of a sale transaction that clearly indicates the selling price to the customer, shipping terms and payment
terms. Evidence of an arrangement generally consists of a contract or purchase order approved by the customer. The Company has
ongoing relationships with certain customers from which it customarily accepts orders by telephone in lieu of purchase orders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes revenue at the time
it receives confirmation that the goods were either tendered at their destination, when shipped &ldquo;FOB destination,&rdquo;
or transferred to a shipping agent, when shipped &ldquo;FOB shipping point.&rdquo; Delivery to the customer is deemed to have occurred
when the customer takes title to the product. Generally, title passes to the customer upon shipment, but could occur when the customer
receives the product based on the terms of the agreement with the customer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The selling prices of all goods are fixed,
and agreed to with the customer, prior to shipment. Selling prices are generally based on established list prices. The right to
return product is customarily based on the terms of the agreement with the customer. The Company estimates and accrues for potential
returns and records this as a reduction of revenue in the same period the related revenue is recognized. Additionally, distribution
fees are paid to certain wholesale distributors based on contractually determined rates. The Company estimates and accrues the
fee on shipment to the respective wholesale distributors and recognizes the fee as a reduction of revenue in the same period the
related revenue is recognized. The Company also offers cash discounts to certain customers, generally 2% of the sales price, as
an incentive for prompt payment. The Company accounts for cash discounts by reducing accounts receivable by the prompt pay discount
amount and recognizes the discount as a reduction of revenue in the same period the related revenue is recognized. Additionally,
the Company participates in certain rebate programs which provide discounted prescriptions to qualified patients. The Company contracts
a third-party to administer the program. The Company estimates and accrues for future rebates based on historical data for rebate
redemption rates and the historical value of redemptions. Rebates are recognized as a reduction of revenue in the same period the
related revenue is recognized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company evaluates the creditworthiness
of new customers and monitors the creditworthiness of its existing customers to determine whether an event or changes in their
financial circumstances would raise doubt as to the collectability of a sale at the time in which a sale is made. Payment terms
on sales made in the United States are generally 30&nbsp;days and are extended up to 90 days for initial product launches, payment
terms internationally generally range from prepaid prior to shipment to 90&nbsp;days.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In the event a sale is made to a customer under
circumstances in which collectability is not reasonably assured, the Company either requires the customer to remit payment prior
to shipment or defers recognition of the revenue until payment is received. The Company maintains a reserve for amounts which may
not be collectible due to risk of credit losses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Product license revenue is generated through
agreements with strategic partners for the commercialization of Microcyn&reg; products. The terms of the agreements sometimes include
non-refundable upfront fees. The Company analyzes multiple element arrangements to determine whether the elements can be separated.
Analysis is performed at the inception of the arrangement and as each product is delivered. If a product or service is not separable,
the combined deliverables are accounted for as a single unit of accounting and recognized over the performance obligation period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 88; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">When appropriate, the Company defers recognition
of non-refundable upfront fees. If the Company has continuing performance obligations then such up-front fees are deferred and
recognized over the period of continuing involvement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes royalty revenues from
licensed products upon the sale of the related products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenue from consulting contracts is recognized
as services are provided. Revenue from testing contracts is recognized as tests are completed and a final report is sent to the
customer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Sales Tax and Value Added Taxes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for sales taxes and value
added taxes imposed on its goods and services on a net basis.</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Cash and Cash Equivalents</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company considers all highly liquid investments
with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents may be invested in money
market funds, commercial paper, variable rate demand instruments, and certificates of deposits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Long-Term Investments</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounted for its ownership of
shares of Ruthigen, Inc. (&ldquo;Ruthigen&rdquo;) common stock at cost in accordance with Accounting Standards Codification (&ldquo;ASC&rdquo;)
325-20 as a result of (a) the restrictions on voting the shares held, (b) the Company having no representation on the Ruthigen
Board of Directors, (c) the Company&rsquo;s inability to set policy at Ruthigen (d) the Company having no further commitments for
funding the operations of Ruthigen and (e) the restrictions on transferability of its shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&rsquo;s long-term investments consisted
of the Company&rsquo;s ownership of 1,650,000 shares of Ruthigen common stock at March 31, 2015. During the year ended March 31,
2016, the Company sold its remaining 1,650,000 shares of Ruthigen common stock for proceeds of $4,537,500 pursuant to a securities
purchase agreement with several investors. Additionally, during the year ended March 31, 2016, the Company paid a $165,000 banker
fee related to the sale transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Concentration of Credit Risk and Major
Customers</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Financial instruments that potentially subject
the Company to concentration of credit risk consist principally of cash, cash equivalents and accounts receivable. Cash and cash
equivalents are maintained in financial institutions in the United States, Mexico and the Netherlands. The Company is exposed to
credit risk in the event of default by these financial institutions for amounts in excess of the Federal Deposit Insurance Corporation
insured limits. Cash and cash equivalents held in foreign banks are intentionally kept at minimal levels, and therefore have minimal
credit risk associated with them.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company grants credit to its business customers,
which are primarily located in Mexico, Europe and the United States. Collateral is generally not required for trade receivables.
The Company maintains allowances for potential credit losses. At March 31, 2016, one customer represented 33% of the net accounts
receivable balance. At March 31, 2016, one customer represented 40%, one customer represented 15%, one customer represented 14%
and two customers each represented 12% of net revenues. At March 31, 2015, one customer represented 56%, and one customer represented
14% of the net accounts receivable balance. During the year ended March&nbsp;31, 2015, one customer represented 47% of net revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Accounts Receivable</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Trade accounts receivable are recorded net
of allowances for cash discounts for prompt payment, doubtful accounts, and sales returns. Estimates for cash discounts and sales
returns are based on analysis of contractual terms and historical trends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&rsquo;s policy is to reserve for
uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable.
The Company periodically reviews its accounts receivable to determine whether an allowance for doubtful accounts is necessary based
on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Other
factors that the Company considers include its existing contractual obligations, historical payment patterns of its customers and
individual customer circumstances, an analysis of days sales outstanding by customer and geographic region, and a review of the
local economic environment and its potential impact on government funding and reimbursement practices. Account balances deemed
to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery
is considered remote. The allowance for doubtful accounts represents probable credit losses at March 31, 2016 and March 31, 2015
in the amounts of $15,000 and $20,000, respectively.&nbsp;Additionally at March 31, 2016 and March 31, 2015 the Company has allowances
of $653,000 and $183,000, respectively, related to potential discounts, returns, distributor fees and rebates. The allowances are
included in Accounts Receivable, net in the accompanying consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 89; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->9<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Inventories</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories are stated at the lower of cost,
cost being determined on a standard cost basis (which approximates actual cost on a first-in, first-out basis), or market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Due to changing market conditions, estimated
future requirements, age of the inventories on hand and production of new products, the Company regularly reviews inventory quantities
on hand and records a provision to write down excess and obsolete inventory to its estimated net realizable value. The Company
recorded reserves to reduce the carrying amounts of inventories to their net realizable value in the amounts of $164,000 and $87,000
at March 31, 2016 and 2015, respectively, which is included in cost of product revenues on the Company&rsquo;s accompanying consolidated
statements of comprehensive loss.</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Fair Value of Financial Assets and Liabilities</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses and other liabilities are carried at cost, which management
believes approximates fair value due to the short-term nature of these instruments. The fair value of capital lease obligations
and equipment loans approximates their carrying amounts as a market rate of interest is attached to their repayment. The Company
measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes
the use of unobservable inputs when measuring fair value. The Company uses three levels of inputs that may be used to measure fair
value:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">Level&nbsp;1&nbsp;&ndash; quoted
prices in active markets for identical assets or liabilities</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">Level&nbsp;2&nbsp;&ndash; quoted
prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that
are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active
markets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">Level&nbsp;3&nbsp;&ndash; inputs
that are unobservable (for example cash flow modeling inputs based on assumptions)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Financial liabilities measured at fair value on a recurring basis
are summarized below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="14" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Fair&nbsp;Value&nbsp;Measurements&nbsp;at&nbsp;March&nbsp;31,&nbsp;2016&nbsp;Using</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Total</B></FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>March&nbsp;31,</B></FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>2016</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Quoted prices in active markets for identical assets</B></FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>(Level&nbsp;1)</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Significant other observable inputs</B></FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>(Level&nbsp;2)</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Significant other unobservable inputs</B></FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>(Level&nbsp;3)</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 48%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Liabilities:</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Derivative liabilities &ndash; warrants</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &ndash;</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="14" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Fair&nbsp;Value&nbsp;Measurements&nbsp;at&nbsp;March&nbsp;31,&nbsp;2015&nbsp;Using</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Total</B></FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>March&nbsp;31,</B></FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>2015</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Quoted prices in active markets for identical assets</B></FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>(Level&nbsp;1)</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Significant other observable inputs</B></FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>(Level&nbsp;2)</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Significant other unobservable inputs</B></FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>(Level&nbsp;3)</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 48%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Liabilities:</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Derivative liabilities &ndash; warrants</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">11,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp; &ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">11,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 3 liabilities are valued using unobservable
inputs to the valuation methodology that are significant to the measurement of the fair value of the liabilities. For fair value
measurements categorized within Level 3 of the fair value hierarchy, the Company&rsquo;s accounting and finance department, who
report to the Chief Financial Officer, determine its valuation policies and procedures. The development and determination of the
unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company&rsquo;s
accounting and finance department and are approved by the Chief Financial Officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 90; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><U>Level 3 Valuation Techniques</U>:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 3 financial liabilities consist of the
derivative liabilities for which there is no current market for these securities such that the determination of fair value requires
significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are
analyzed each period based on changes in estimates or assumptions and recorded as appropriate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company uses the Black-Scholes option valuation
model to value Level 3 derivatives at inception and on subsequent valuation dates. This model incorporates transaction details
such as the Company&rsquo;s stock price, contractual terms, maturity, risk free rates, as well as volatility. A significant decrease
in the volatility or a significant decrease in the Company&rsquo;s stock price, in isolation, would result in a significantly lower
fair value measurement. Changes in the values of the derivative liabilities are recorded in &ldquo;Gain (loss) due to change in
fair value of derivative liabilities&rdquo; in the Company&rsquo;s consolidated statements of comprehensive (loss) income.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of March 31, 2016 and 2015, there were no
transfers in or out of Level 3 from other levels in the fair value hierarchy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Property and Equipment</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over
the estimated useful lives of the respective assets. Depreciation of leasehold improvements is computed using the straight-line
method over the lesser of the estimated useful life of the improvement or the remaining term of the lease. Estimated useful asset
life by classification is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 92%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 6%; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Years</B></FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Office equipment</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Manufacturing, lab and other equipment</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Furniture and fixtures</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">7</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Upon retirement or sale, the cost and related
accumulated depreciation are removed from the consolidated balance sheet and the resulting gain or loss is reflected in operations.
Maintenance and repairs are charged to operations as incurred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Impairment of Long-Lived Assets</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company periodically reviews the carrying
values of its long-lived assets when events or changes in circumstances would indicate that it is more likely than not that their
carrying values may exceed their realizable values, and records impairment charges when considered necessary. Specific potential
indicators of impairment include, but are not necessarily limited to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">a significant decrease in the fair value
of an asset;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">a significant change in the extent or
manner in which an asset is used or a significant physical change in an asset;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">a significant adverse change in legal
factors or in the business climate that affects the value of an asset;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">an adverse action or assessment by the
U.S.&nbsp;Food and Drug Administration or another regulator; and</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 38.25pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">an accumulation of costs
significantly in excess of the amount originally expected to acquire or construct an asset; and operating or cash flow losses combined
with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with
an income-producing asset.</FONT></TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">When circumstances indicate that an impairment
may have occurred, the Company tests such assets for recoverability by comparing the estimated undiscounted future cash flows expected
to result from the use of such assets and their eventual disposition to their carrying amounts. In estimating these future cash
flows, assets and liabilities are grouped at the lowest level for which there are identifiable cash flows that are largely independent
of the cash flows generated by other such groups. If the undiscounted future cash flows are less than the carrying amount of the
asset, an impairment loss, measured as the excess of the carrying value of the asset over its estimated fair value, will be recognized.
The cash flow estimates used in such calculations are based on estimates and assumptions, using all available information that
management believes is reasonable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 91; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->11<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with an agreement with certain
investors to sell its interest in Ruthigen at a fixed price of $2.75 per share, the Company determined that the carrying value
of the shares held in Ruthigen was impaired. As a result, during the year ended March 31, 2015, the Company recorded an impairment
loss in the amount of $4,650,000 which represents the difference between the cost and aggregate purchase price of $2.75 per share
the Company agreed to sell its interest in Ruthigen. At March 31, 2015, the Company&rsquo;s interest in Ruthigen was reported as
a long-term asset on its consolidated financial statements rather than a consolidated subsidiary given that the Company no longer
controlled Ruthigen, the Company and had very little means to control the value of the asset.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended March 31, 2016, the Company
had noted no indicators of impairment.</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><B><I>Research
and Development</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Research and development expense is charged
to operations as incurred and consists primarily of personnel expenses, clinical and regulatory services and supplies. For the
years ended March 31, 2016 and 2015, research and development expense amounted to $1,806,000 and $1,533,000, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Advertising Costs</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Advertising costs are charged to operations
as incurred. Advertising costs amounted to $175,000 and $231,000, for the years ended March 31, 2016 and 2015, respectively. Advertising
costs are included in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive
loss.</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Shipping and Handling Costs</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company classifies amounts billed to customers
related to shipping and handling in sale transactions as product revenues. Shipping and handling costs incurred are recorded in
cost of product revenues. For the years ended March 31, 2016 and 2015, the Company recorded revenue related to shipping and handling
costs of $59,000 and $114,000, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Foreign Currency Reporting</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&rsquo;s subsidiary, OTM, uses the
local currency (Mexican Pesos) as its functional currency and its subsidiary, OIS Europe, uses the local currency (Euro) as its
functional currency. Assets and liabilities are translated at exchange rates in effect at the balance sheet date, and revenue and
expense accounts are translated at average exchange rates during the period. Resulting translation adjustments amounted to $347,000
and $438,000 for the years ended March 31, 2016 and 2015, respectively, and were recorded in other comprehensive loss in the accompanying
consolidated statements of comprehensive loss.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Foreign currency transaction gains (losses)
relate primarily to trade payables and receivables between subsidiaries OTM and OIS Europe. These transactions are expected to
be settled in the foreseeable future. The Company recorded foreign currency transaction gains of $38,000 and losses of $24,000
for the years ended March 31, 2016 and 2015, respectively. The related gains and losses were recorded in other expense, net, in
the accompanying consolidated statements of comprehensive loss.</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Stock-Based Compensation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for share-based awards
exchanged for employee services at the estimated grant date fair value of the award. The Company estimates the fair value of employee
stock option awards using the Black-Scholes option pricing model. The Company amortizes the fair value of employee stock options
on a straight-line basis over the requisite service period of the awards.&nbsp; Compensation expense includes the impact of an
estimate for forfeitures for all stock options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for equity instruments
issued to non-employees at their fair value on the measurement date. The measurement of stock-based compensation is subject to
periodic adjustment as the underlying equity instrument vests or becomes non-forfeitable. Non-employee stock-based compensation
charges are amortized over the vesting period or as earned.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Income Taxes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred tax assets and liabilities are determined
based on the differences between the financial reporting and tax bases of assets and liabilities and net operating loss and credit
carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Tax benefits claimed or expected to be claimed
on a tax return are recorded in the Company&rsquo;s consolidated financial statements. A tax benefit from an uncertain tax position
is only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities,
based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a
position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate
resolution. Uncertain tax positions have had no impact on the Company&rsquo;s consolidated financial condition, results of comprehensive
loss or cash flows.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 92; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->12<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Comprehensive Loss</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Other comprehensive loss includes all changes
in stockholders&rsquo; equity during a period from non-owner sources and is reported in the consolidated statement of changes in
stockholders&rsquo; equity. To date, other comprehensive loss consists of changes in accumulated foreign currency translation adjustments.
Accumulated other comprehensive losses at March 31, 2016 and 2015 were $3,854,000 and $3,507,000, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Net Loss per Share</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company computes basic net loss per share
by dividing net loss per share available to common stockholders by the weighted average number of common shares outstanding for
the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share, if presented, would include
the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the
&ldquo;treasury stock&rdquo; and/or &ldquo;if converted&rdquo; methods as applicable. The computation of basic loss per share for
the years ended March 31, 2016 and 2015 excludes the potentially dilutive securities summarized in the table below because their
inclusion would be anti-dilutive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left">Options to purchase common stock</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">3,769,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">2,877,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Warrants to purchase common stock</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,424,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,741,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,193,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,618,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Common Stock Purchase Warrants and Other
Derivative Financial Instruments</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company classifies common stock purchase
warrants and other free standing derivative financial instruments as equity if the contracts (i) require physical settlement or
net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement
or net-share settlement). The Company classifies any contracts that (i) require net-cash settlement (including a requirement to
net cash settle the contract if an event occurs and if that event is outside the control of the Company), (ii) give the counterparty
a choice of net cash settlement or settlement in shares (physical settlement or net-share settlement), or (iii) contain reset provisions
as either an asset or a liability. The Company assesses classification of its freestanding derivatives at each reporting date to
determine whether a change in classification between assets and liabilities is required. The Company determined that its freestanding
derivatives, which principally consist of warrants to purchase common stock, satisfied the criteria for classification as equity
instruments, other than certain warrants that contained reset provisions and certain warrants that required net-cash settlement
that the Company classified as derivative liabilities as more fully described in Note 11.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Preferred Stock</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company applies the accounting standards
for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Shares that
are subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. The Company
classifies conditionally redeemable preferred shares, which includes preferred shares that feature redemption rights that are either
within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company&rsquo;s
control, as temporary equity. At all other times, preferred shares are classified as stockholders' equity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Convertible Instruments</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company evaluates and bifurcates conversion
options from their host instruments and accounts for them as free standing derivative financial instruments according to certain
criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument
are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that
embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable
generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument
with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule
is when the host instrument is deemed to be conventional as that term is described under applicable Generally Accepted Accounting
Principles (&ldquo;GAAP&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Subsequent Events</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Management has evaluated subsequent events
or transactions occurring through the date these consolidated financial statements were issued.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 93; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->13<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Recent Accounting Pronouncements</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2016, the FASB issued ASU 2016-02,
<I>Leases</I> (&quot;ASU 2016-02&quot;). The standard amends the existing accounting standards for lease accounting, including
requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02
will be effective beginning in the first quarter of 2019. Early adoption of ASU 2016-02 is permitted. The new leases standard requires
a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application,
with an option to use certain transition relief. The Company is currently evaluating the impact of adopting ASU 2016-02 on our
consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In March 2016, the FASB issued ASU No. 2016-08,
<I>Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).
</I>This ASU amends the principal versus agent guidance in ASU No. 2014-09, <I>Revenue from Contracts with Customers (Topic 606)</I>
which was issued in May 2014 (&ldquo;ASU 2014-09&rdquo;). Further, in April 2016, the FASB issued ASU No. 2016-10, <I>Revenue from
Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing</I>. This ASU also amends ASU 2014-09 and
is related to the identification of performance obligations and accounting for licenses. The effective date and transition requirements
for both of these amendments to ASU 2014-09 are the same as those of ASU 2014-09, which was deferred for one year by ASU No. 2015-14,
<I>Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date</I>. That is, the guidance under these standards
is to be applied using a full retrospective method or a modified retrospective method, as outlined in the guidance, and is effective
for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted
only for annual periods, and interim period within those annual periods, beginning after December 15, 2016. The Company is currently
evaluating the provisions of each of these standards and assessing their impact on the Company&rsquo;s consolidated financial statements
and disclosures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In March 2016, the FASB issued ASU No. 2016-09,
<I>Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.</I> This ASU makes targeted
amendments to the accounting for employee share-based payments. This guidance is to be applied using various<I> </I>transition
methods such as full retrospective, modified retrospective, and prospective based on the criteria for the specific amendments as
outlined in the<I> </I>guidance. The guidance is effective for annual periods, and interim periods within those annual periods,
beginning after December 15, 2016. Early adoption<I> </I>is permitted, as long as all of the amendments are adopted in the same
period. The Company is currently evaluating the provisions of this guidance and<I> </I>assessing its impact on the Company&rsquo;s
consolidated financial statements and disclosures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounting standards that have been issued
or proposed by the FASB, SEC and/or other standards-setting bodies that do not require adoption until a future date are not expected
to have a material impact on the condensed consolidated financial statements upon adoption.</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE&nbsp;4&nbsp;&ndash; Accounts Receivable</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts receivable consists of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left">Accounts receivable</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">2,942,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,720,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Less: allowance for doubtful accounts</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(15,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(20,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less: discounts, rebates, distributor fees and returns</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(653,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(183,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,274,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,517,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE&nbsp;5&nbsp;&ndash; Inventories</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories consist of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left">Raw materials</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,104,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">865,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Finished goods</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">536,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">537,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,640,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,402,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 94; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->14<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE&nbsp;6&nbsp;&ndash; Prepaid Expenses
and Other Current Assets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Prepaid expenses and other current assets consist
of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left">Prepaid insurance</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">405,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">367,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Prepaid rebates</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">378,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Other prepaid expenses and other current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">722,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">211,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,505,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">592,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE&nbsp;7&nbsp;&ndash; Property and Equipment</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment consists of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left">Manufacturing, lab, and other equipment</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">3,075,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">2,937,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Office equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">298,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">278,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Furniture and fixtures</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">83,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">82,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Leasehold improvements</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">307,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">249,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,763,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,546,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less: accumulated depreciation and amortization</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,913,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,751,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">850,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">795,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Depreciation and amortization expense amounted
to $244,000 and $253,000 for the years ended March 31, 2016 and 2015, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended March 31, 2015, the
Company realized  a gain of $13,000 on the disposal of property and equipment.&nbsp;&nbsp;This amount was recorded
within operating expenses in the accompanying consolidated statements of comprehensive loss.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE 8 &ndash; Investment in Ruthigen, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&rsquo;s long-term investments consisted
of the Company&rsquo;s ownership of 1,650,000 shares of Ruthigen common stock at March 31, 2015. During the year ended March 31,
2016, the Company sold its remaining 1,650,000 shares of Ruthigen common stock for proceeds of $4,537,500 pursuant to a securities
purchase agreement with two investors. Additionally, in the year ended March 31, 2016, the Company paid a $165,000 banker fee related
to the sale transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 8, 2015, the Company entered into a securities
purchase agreement pursuant to which the Company agreed to sell its 2,000,000 shares in Ruthigen to two accredited investors for
an aggregate purchase price of $5,000,000 upon the occurrence of a trigger event during a standstill period of 60 calendar days.
The securities purchase agreement lapsed according to its terms, however, as a result of the Company entering into the agreement,
the Company determined that the carrying value of the shares held in Ruthigen were impaired. As a result, the Company recorded
an impairment loss in the amount of $4,650,000 which represents the difference between cost and aggregate purchase price of $2.75
per share the Company agreed to sell its interest in Ruthigen.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE&nbsp;9&nbsp;&ndash; Accrued Expenses
and Other Current Liabilities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accrued expenses and other current liabilities
consist of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left">Salaries and related costs</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">693,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">545,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Professional fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">557,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">137,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">276,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">100,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,526,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">782,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 95; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->15<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE&nbsp;10&nbsp;&ndash; Long-Term Debt</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Financing of Insurance Premiums&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 25, 2015, the Company entered into
a note agreement for $116,000 with an interest rate of 5.50% per annum. This instrument was issued in connection with financing
insurance premiums. The note was payable in monthly installments of $17,000 with the final payment on August 25, 2015. During the
year ended March 31, 2015, the Company made principal and interest payments of $33,000 and $1,000, respectively. During the year
ended March 31, 2016, the Company made principal and interest payments of $83,000 and $1,000, respectively. The note was paid in
full during the year ended March 31, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 25, 2016, the Company entered into
a note agreement for $146,000 with an interest rate of 6.25% per annum. This instrument was issued in connection with financing
insurance premiums. The note is payable in monthly installments of $17,000 with the final payment on August 25, 2016. During the
year ended March 31, 2016, the Company made principal and interest payments of $32,000 and $1,000, respectively. The remaining
balance of this note amounted to $114,000 at March 31, 2016 which is included in the current portion of long-term debt in the accompanying
consolidated balance sheet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 11 &ndash; Derivative Liability</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp; <B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Warrants Issued in Conjunction with the
Company&rsquo;s December 9, 2013 and February 26, 2014 Registered Direct Offerings</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company deems financial instruments which
require net-cash settlement as either an asset or a liability. The common stock purchase warrants issued in conjunction with the
Company&rsquo;s December 9, 2013 and February 26, 2014 registered direct offerings contain a net-cash settlement feature which
give the warrant holder the right to net-cash settlement in the event certain transactions occur. Pursuant to the terms of the
warrants, if such a transaction occurs the warrant holder will be entitled to a net-cash settlement value calculated using the
Black-Scholes valuation model using an expected volatility equal to the greater of 100% and the 30 day volatility obtained from
the HVT function on Bloomberg, an expected term equal to the remaining term of the warrants, and applicable risk-free interest
rate corresponding to the U.S. Treasury.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The derivative liabilities relating to the
warrants with net-cash settlement provisions were valued using the Black-Scholes option valuation model and the following assumptions
on the following dates:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Measurement<BR> Date</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Warrants</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Remaining<BR> Contract<BR> Term in<BR> Years</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Exercise<BR> Price</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Volatility</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Risk-free<BR> Interest<BR> Rate</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fair<BR> Value</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold">Warrant</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 18%; text-align: left">Placement Agent Warrants</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 15%; text-align: center">March 31, 2015</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">16,500</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">1.09</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">5.00</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">100%</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">0.26%</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">1,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Investor - Series A Warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">March 31, 2015</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.41</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.14%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Investor - Series B Warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">March 31, 2015</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,400,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.41</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.63</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.14%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Placement Agent Warrants</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">March 31, 2015</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">69,037</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.09</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.00</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100%</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.26%</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold">Warrant</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Placement Agent Warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">March 31, 2016</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.09</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.21%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Placement Agent Warrants</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">March 31, 2016</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">69,037</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.09</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.00</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100%</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.21%</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table sets forth a summary of
the changes in the fair value of our Level 3 financial liabilities that are measured at fair value on a recurring basis:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;Ended March 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left">Beginning balance</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">11,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">3,175,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Fair value of warrants issued</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Mark to market net unrealized gain</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(11,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,164,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Reclassification to additional paid in capital</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">Ending balance</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 96; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE&nbsp;12&nbsp;&ndash; Commitments and
Contingencies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Lease Commitments</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 15, 2013, the Company leased
office space in Mexico with an address of: Av De Las Americas, 1592 Piso 7, en la Colonia Country Club en Guadalajara
Jalisco, CP 44637 for 23,400 Mexican Pesos (approximately $1,800 USD) per month. One month&rsquo;s rent was required as a
deposit. The lease was terminated in June 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company also shares certain office and
laboratory space, as well as certain laboratory equipment, in a building located at 454 North 34th Street, Seattle, Washington.
The space is rented for $2,700 per month and requires a ninety day notice for cancellation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company currently rents approximately 800
square feet of sales office space in Herten, the Netherlands.&nbsp; The office space is rented on a month to month basis at $1,700
per month and requires a sixty day notice for cancellation.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 10, 2012, the Company entered into
Amendment No. 7 to its property lease agreement, extending the lease on its Petaluma, California facility to September 30, 2017.
Pursuant to the amendment, in exchange for certain improvements on the building, the Company agreed to increase the lease payment
from $10,380 to $11,072 per month.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Minimum lease payments for non-cancelable operating
leases are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-decoration: underline"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B><U>For&nbsp;Years&nbsp;Ending&nbsp;March&nbsp;31,</U></B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 84%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2017</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">370,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2018</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">222,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2019</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">91,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2020</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">8,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Total minimum lease payments</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">691,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Rental expense amounted to $442,000 and $446,000
for the years ended March 31, 2016 and 2015, respectively and is recorded in the accompanying consolidated statement of comprehensive
loss.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Legal Matters</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0; text-align: justify">The Company, on occasion, may be involved
in legal matters arising in the ordinary course of business including matters involving proprietary technology. While management
believes that such matters are currently insignificant, matters arising in the ordinary course of business for which the Company
is or could become involved in litigation may have a material adverse effect on its business, financial condition of comprehensive
loss.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0; text-align: justify"><B><I>Employment Agreements</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0; text-align: justify">As of March 31, 2016, the Company had employment
agreements in place with four of its key executives. The agreements provide, among other things, for the payment of nine to twenty-four
months of severance compensation for terminations under certain circumstances. With respect to these agreements, at March 31, 2016,
potential severance amounted to $1,097,000 and aggregated annual salaries amounted to $944,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0; text-align: justify"><B><I>Commercial Agreements</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On August 9, 2012, the Company, along with
its Mexican subsidiary and manufacturer Oculus Technologies of Mexico S.A. de C.V. (&ldquo;Manufacturer&rdquo;), entered into a
license, exclusive distribution and supply agreement with More Pharma Corporation, S. de R.L. de C.V. (&ldquo;More Pharma&rdquo;)
(the &ldquo;License Agreement&rdquo;). For a one-time payment of $500,000, the Company granted More Pharma an exclusive license,
with the right to sublicense, under certain conditions and with the Company&rsquo;s consent, to all of the Company&rsquo;s proprietary
rights related to certain of its pharmaceutical products for human application that utilize the Company&rsquo;s Microcyn&reg; Technology
within Mexico. For an additional one-time payment of $3,000,000, the Company also agreed to appoint More Pharma as the exclusive
distributor of certain of its products in Mexico for the term of the agreement. Additionally, Manufacturer granted More Pharma
an exclusive license to certain of Manufacturer&rsquo;s then-held trademarks in exchange for a payment of $100,000 to Manufacturer.
The Company has the ability to terminate the agreement if certain annual purchase minimums are not met. The term of the agreement
is twenty-five years from the effective date of August 15, 2012. The term of the License Agreement will automatically renew after
the twenty-five year term for successive two year terms as long as More Pharma has materially complied with any and all of the
obligations under the License Agreement, including but not limited to, meeting the minimum purchase requirements set forth therein.
On January 6, 2015, the Company was notified that More Pharma had been acquired by Laboratorios Sanfer S.A. de C.V (&ldquo;Sanfer&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 97; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->17<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Additionally, on August 9, 2012, the Company,
along with Manufacturer, entered into an exclusive distribution and supply agreement with More Pharma (the &ldquo;Distribution
Agreement&rdquo;). For a one-time payment of $1,500,000, the Company granted More Pharma the exclusive ability to market and sell
certain of its pharmaceutical products for human application that utilize the Company&rsquo;s Microcyn&reg; Technology. The Company
also appointed More Pharma as its exclusive distributor, with the right to execute sub-distribution agreements, under certain conditions,
and with the Company&rsquo;s consent, within a number of Central and South American countries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company will recognize the $5,100,000 related
to the License Agreement and the Distribution Agreement as revenue on the straight line basis consistent with the Company&rsquo;s
historical experience with contracts having similar terms, which is typically over three to five years of the contract. During
years ended March 31, 2016 and 2015, the Company recognized $751,000 and $1,499,000, respectively, related to the amortization
of the upfront fees received in the transaction. At March 31, 2016, the Company had outstanding accounts receivable of $912,000
due from Laboratorios Sanfer. At March 31, 2015, the Company had outstanding accounts receivable of $843,000 due from Laboratorios
Sanfer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE&nbsp;13&nbsp;&ndash; Stockholders&rsquo;
Equity</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Authorized Capital</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 29, 2015, the stockholders of the Company
approved a reverse stock split of the Company&rsquo;s outstanding common stock and to proportionally decrease the total number
of shares that the Company is authorized to issue at a whole number ratio in the range of 1-for-5 to 1-for-9, such ratio to be
determined in the discretion of the Company&rsquo;s Board of Directors, and authorized the Company&rsquo;s Board of Directors to
effect the reverse stock split, if in their judgment it is necessary, at any time until June 29, 2016, upon which date the resolution
lapses. To date, no reverse stock split has been authorized by the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Effective October 22, 2015, the Company increased
its authorized share capital from 30,000,000 shares of common stock to 60,000,000 shares of common stock, $0.0001 par value per
share by filing a certificate of amendment with the Secretary of State of Delaware. The share increase was approved by the Company&rsquo;s
stockholders at the 2015 Annual Meeting of Stockholders on October 9, 2015.&nbsp;Additionally, the Company is authorized to issue
up to 714,286 shares of convertible preferred stock with a par value of $0.0001 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Description of Common Stock</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Each share of common stock has the right to
one vote. The holders of common stock are entitled to dividends when funds are legally available and when declared by the board
of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;<B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>April 2014 At-the-Market Offering</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On April 2, 2014, the Company entered into
an At-the-Market Issuance Sales Agreement with MLV &amp; Co. LLC under which the Company can issue and sell shares of its common
stock having an aggregate offering price of up to $9,159,000 from time to time through MLV acting as its sales agent. To date,
the Company has raised an aggregate $4,706,000 in connection with this agreement. The Company will pay MLV a commission rate equal
to 3.0% of the gross proceeds from the sale of any shares of common stock sold through MLV as agent under the Sales Agreement.
For the year ended March 31, 2016 the Company sold 2,254,596 shares for gross proceeds of $3,263,000 and net proceeds of $3,150,000
after deducting commissions and other offering expenses. For the year ended March 31, 2015, the Company sold 467,934 shares for
gross proceeds of $1,443,000 and net proceeds of $1,341,000 after deducting commissions and other offering expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>March 2016 Underwritten Public Offering</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 18, 2016, the Company entered into
an underwriting agreement with Dawson James Securities, Inc. with respect to the issuance and sale of an aggregate of 3,400,000
units, each unit consisting of one share of common stock, par value $0.0001 per share, together with one quarter (0.25) of one
warrant to purchase one share of common stock at an exercise price equal to $1.00 per share, in an underwritten public offering.
The public offering price for each unit, consisting of one share of common stock together with one quarter (0.25) of one warrant,
was $1.00. Because the Company is prohibited from issuing fractional shares, the warrants can only be exercised in lots of four,
which means that each holder must exercise four March 2016 Warrants to receive one share of common stock, or a total of 850,000
shares. The warrants have an initial exercise price of $1.00 per share and have a term of three years. Pursuant to the underwriting
agreement, the Company paid Dawson James Securities, Inc. a cash fee equal to 8% of the aggregate gross proceeds raised in this
offering and also paid $50,000 in legal fees and expenses of the underwriter&rsquo;s legal counsel. The gross proceeds from the
sale of the shares of common stock and the warrants was $3,400,000, and net proceeds of 2,994,000 after deducting underwriting
commissions and other estimated offering expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I></I></B></P>

<!-- Field: Page; Sequence: 98; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>January 2015 Underwritten Public Offering</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 20, 2015, the Company entered into
an underwriting agreement with Maxim Group LLC with respect to the issuance and sale of an aggregate of 6,250,000 shares of common
stock, par value $0.0001 per share, together with warrants to purchase an aggregate of 4,687,500 shares of its common stock at
an exercise price equal to $1.30 per share in an underwritten public offering. The public offering price for each share of common
stock together with 0.75 of a warrant was $1.00. Pursuant to the underwriting agreement, the Company also granted Maxim Group LLC
a 45-day option to purchase an additional 937,500 shares of common stock and/or 703,125 warrants to purchase an additional 703,125
shares of common stock to cover any over-allotments made by the underwriters in the sale and distribution of the shares and warrants.
On January 21, 2015, Maxim Group LLC exercised the over-allotment option with respect to 703,125 warrants. The offering, including
the partial exercise of the over-allotment option, closed on January 26, 2015. On March 3, 2015, Maxim Group LLC exercised the
over-allotment option with respect to 134,500 shares of common stock, which closed on March 6, 2015. The registration statement
for the sale of the shares of common stock and warrants sold in the public offering became effective January 20, 2015, file number
333-200461. The gross proceeds from the sale of the shares of common stock and the warrants, including the partial exercise of
the over-allotment option was $6,392,000, and net proceeds of $5,444,000 after deducting underwriting discounts and commissions
and other offering expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Common Stock Issued to Settle Fees for Services Provided</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On April 24, 2009, the Company entered into
an agreement with Advocos LLC, a contract sales organization that serves as part of the Company&rsquo;s sales force, for the sale
of the Company&rsquo;s tissue care products in the United States. Pursuant to the agreement, the Company agreed to pay the contract
sales organization a monthly fee and potential bonuses that will be based on achievement of certain levels of sales. The Company
agreed to issue the contract sales organization cash or shares of common stock to settle fees for its services. The Company has
determined that the fair value of the common stock was more readily determinable than the fair value of the services rendered.
During the year ended March 31, 2016, the Company issued 208,519 shares of common stock related to this agreement. The fair market
value of the common stock was $286,000 at issuance. During the year ended March 31, 2016, the Company recorded $190,000 of expense
related to stock issued pursuant to this agreement and settled $96,000 of fees accrued in prior periods. During the year ended
March 31, 2015 the Company issued 32,501 shares of common stock in connection with this agreement. During the year ended March
31, 2015 the Company recorded $76,000 expense related to stock issued in connection with this agreement. The expense was recorded
as selling, general and administrative expense in the accompanying consolidated statements of comprehensive loss.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Common Stock Purchase Warrants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">On March 31, 2016,
the Company issued Dawson James Securities, Inc. a warrant to purchase 250,000&nbsp;shares of the Company&rsquo;s common stock
at an exercise price of $1.00 per share in connection with a service agreement. The warrants were non-forfeitable at date of issuance.
The warrants were valued using the Black-Scholes option pricing model. Assumptions used were as follows: Fair value of the underlying
stock $0.95; risk-free interest rate 0.01%; contractual life of 3&nbsp;years; dividend yield of 0%; and volatility of 87%. The
fair value of the warrants amounted to $128,000 and was recorded as selling, general and administrative expense in the accompanying
consolidated statement of comprehensive loss for the year ended March&nbsp;31, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE&nbsp;14&nbsp;&ndash; Stock-Based Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>2006 Stock Plan</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The board initially adopted the 2006 Stock
Incentive Plan on August 25, 2006. On December&nbsp;14, 2006, the stockholders approved the 2006 Stock Incentive Plan which became
effective at the close of the Company&rsquo;s initial public offering. The 2006 Stock Incentive Plan was later amended and restated
by a unanimous board resolution on April&nbsp;26, 2007, and such amendments were subsequently approved by the stockholders.&nbsp;On
September 10, 2009, the Company&rsquo;s shareholders approved a subsequent amendment to the 2006 Stock Incentive Plan. The 2006
Stock Incentive Plan, as amended and restated, is hereafter referred to as the &ldquo;2006 Plan.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The 2006 Plan provides for the granting of
incentive stock options to employees and the granting of nonstatutory stock options to employees, non-employee directors, advisors
and consultants. The 2006 Plan also provides for grants of restricted stock, stock appreciation rights and stock unit awards to
employees, non-employee directors, advisors and consultants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In accordance with the 2006 Plan the stated
exercise price may not be less than 100% and 85% of the estimated fair market value of common stock on the date of grant for ISOs
and NSOs, respectively, as determined by the board of directors at the date of grant. With respect to any 10% stockholder, the
exercise price of an ISO or NSO shall not be less than 110% of the estimated fair market value per share on the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Options issued under the 2006 Plan generally
have a ten-year term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 99; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Shares subject to awards that expire unexercised
or are forfeited or terminated will again become available for issuance under the 2006 Plan. No participant in the 2006 Plan can
receive option grants, restricted shares, stock appreciation rights or stock units for more than 26,786&nbsp;shares in the aggregate
in any calendar year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On November 7, 2006, the board initially authorized
a total of 178,571 of the Company&rsquo;s common stock shares (adjusted for the reverse stock split effective April 1, 2013) for
issuance under the 2006 Plan in addition to increases provided for in the 2006 Plan through August 25, 2016. On September&nbsp;10,
2009, the Company&rsquo;s shareholders approved an amendment of the 2006 Plan which authorized and reserved an additional 142,858
shares (adjusted for the reverse stock split effective April 1, 2013) for issuance under the 2006 Plan. The number of shares of
the Company&rsquo;s common stock reserved for issuance under the 2006 Plan may increase if such increase is approved by the board,
with no further action by the stockholders, at the beginning of each fiscal year by an amount equal to the lesser of (i) 250,000
shares (adjusted for the reverse stock split effective April 1, 2013); (ii) 5% of the outstanding shares of common stock of the
Company on the last day of the immediately preceding year, or (iii) an amount determined by the Company&rsquo;s board of the directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As provided under the 2006 Plan, the aggregate
number of shares authorized for issuance as awards under the 2006 Plan increased on April&nbsp;1, 2012, by 207,199&nbsp;shares
(which number constitutes 5% of the outstanding shares on the last day of the year ended March&nbsp;31, 2012).&nbsp;&nbsp;During
the year ended March 31, 2015, the board of directors approved an increase of 250,000 shares authorized for issuance. During the
year ended March 31, 2016, the board of directors approved an increase of 250,000 shares authorized for issuance.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>2011 Stock Plan</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On September 12, 2011, upon recommendation
of the board, the stock holders approved the Company&rsquo;s 2011 Stock Incentive Plan (the &ldquo;2011 Plan&rdquo;). The 2011
Plan is effective as of June 21, 2012.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The 2011 Plan provides for the grant of incentive
stock options as defined in Section 422 of the Internal Revenue Code to employees, and the grant of non-statutory stock options
and stock purchase rights to employees, non-employee directors, advisors and consultants. The 2011 Plan also permits the grant
of stock appreciation rights, stock units and restricted stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The board has authorized 428,572 of the Company&rsquo;s
common stock for issuance under the 2011 Plan, in addition to automatic increases provided for in the 2011 Plan through April 1,
2021. The number of shares of the Company&rsquo;s common stock reserved for issuance under the 2011 Plan will automatically increase,
with no further action by the stockholders, at the beginning of each fiscal year by an amount equal to the lesser of (i) 15% of
the outstanding shares of the Company&rsquo;s common stock on the last day of the immediately preceding year, or (ii) an amount
approved by the Company&rsquo;s board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Options issued under the 2011 Plan will generally
have a ten-year term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In accordance with the 2011 Plan, the stated
exercise price of an employee incentive stock option shall not be less than 100% of the estimated fair market value of a share
of common stock on the date of grant, and the stated exercise price of an nonstatutory option shall not be less 85% of the estimated
fair market value of a share of common stock on the date of grant, as determined by the board of directors. An employee who owns
more than 10% of the total combined voting power of all classes of outstanding stock of the Company shall not be eligible for the
grant of an employee incentive stock option unless such grant satisfies the requirements of Section 422(c)(5) of the Internal Revenue
Code.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Shares subject to awards that expire unexercised
or are forfeited or terminated for any other reason will again become available for issuance under the 2011 Plan. No participant
in the 2011 Plan can receive option grants, stock appreciation rights, restricted shares, or stock units for more than 107,143
shares in the aggregate in any calendar year. As provided under the 2011 Plan, the aggregate number of shares authorized for issuance
as awards under the 2011 Plan automatically increases on April 1 of each year by in an amount equal to the lesser of (i) 15% of
the outstanding shares on the last day of the immediately preceding year, or (ii) an amount determined by the board. During the
year ended March 31, 2015, the board of directors approved an increase of 1,120,021 shares authorized for issuance. During the
year ended March 31, 2016, the board of directors approved an increase of 2,256,762 shares authorized for issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Performance Based Awards Program</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&rsquo;s Compensation Committee
approved a short-term performance based bonus program for fiscal 2016 with predetermined objectives related to revenue and expense
targets. In the event the fiscal 2016 objectives are met, eighty-percent of the options will vest on June 30, 2016. On August 21,
2015, certain executives and senior managers were granted an aggregate of 377,500 stock options in connection with this program.
At March 31, 2016, it was determined targets were met related to 252,000 stock options which will vest on June 30, 2016. Additionally,
at March 31, 2016, 50,000 stock options expired due to targets that were not met. The remaining 75,500 stock options will vest
at the discretion of the Company&rsquo;s Compensation Committee on June 30, 2016. In the event the objectives are not met the stock
options will expire unvested. The stock options have an exercise price of $1.16 and if they vest will expire ten years from the
date of grant. At March 31, 2016, it was determined by the Company that it&rsquo;s probable the discretionary options would vest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 100; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->20<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company approved a long-term market-based
stock option bonus program for senior managers. Vesting of the stock options granted as part of this program is contingent upon
the achievement of four separate target stock prices. The market-based options vest based on the 30 trading day trailing average
of the stock price of the Company&rsquo;s common stock with options vesting in 25% increments at each of the target stock prices.
On the last day of each quarter, the chief executive officer and/or chief financial officer will determine if any of the target
stock prices have been met by evaluating the period between the quarter end date and the grant date of the option. In the event
that a target stock price has been met, the senior manager will be notified that such options have vested. At the end of five
years from the date of the grant, if the stock target prices have not been met, then the unvested portion of the option will expire.
On August 21, 2015, certain senior managers were granted an aggregate of 118,750 stock options in connection with this program.
The stock options have an exercise price of $1.16 and if they vest will expire ten years from the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Stock-Based Compensation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company issues service, performance and
market-based stock options to employees and non-employees. The Company estimates the fair value of service and performance stock
option awards using the Black-Scholes option pricing model. The Company estimates the fair value of market-based stock option awards
using a Monte-Carlo simulation. Compensation expense for stock option awards is amortized on a straight-line basis over the awards&rsquo;
vesting period. Compensation expense includes the impact of an estimate for forfeitures for all stock options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The expected term of the stock options represents
the average period the stock options are expected to remain outstanding and is based on the expected term calculated using the
approach prescribed by&nbsp;the Securities&nbsp;and Exchange Commission's Staff Accounting Bulletin No.&nbsp;110 for &ldquo;plain
vanilla&rdquo; options. The expected stock price volatility for the Company&rsquo;s stock options was determined by using an average
of the historical volatilities of the Company and its industry peers. The Company will continue to analyze the stock price volatility
and expected term assumptions as more data for the Company&rsquo;s common stock and exercise patterns become available. The risk-free
interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company&rsquo;s
stock options. The expected dividend assumption is based on the Company&rsquo;s history and expectation of dividend payouts. The
Company estimates forfeitures based on historical experience and reduces compensation expense accordingly. The estimated forfeiture
rates used during the year ended March 31, 2016 ranged from 1.18% to 4.71%. The estimated forfeiture rates used during the year
ended March 31, 2015 ranged from 0.21% to 0.85%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company estimated the fair value of employee
and non-employee stock options using the Black-Scholes option pricing model. The fair value of employee stock options is being
amortized on a straight-line basis over the requisite service periods of the respective awards. The fair value of employee stock
options was estimated using the following weighted-average assumptions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;Ended&nbsp;March&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left">Fair value of the Company&rsquo;s common stock on date of grant</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1.18</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">2.28</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Expected Term</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">6.39 yrs</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">6.67 yrs</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Risk-free interest rate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.63%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.70%</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Dividend yield</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.00%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.00%</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>Volatility</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">93.0%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">93.0%</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The weighted-average fair values of options
granted during the years ended March 31, 2016 and 2015 were $0.89 and $1.92, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Share-based awards compensation expense is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Stock-based<BR> Compensation<BR> for&nbsp;the&nbsp;Year&nbsp;Ended<BR> March&nbsp;31, 2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Stock-based<BR> Compensation<BR> for&nbsp;the&nbsp;Year&nbsp;Ended<BR> March&nbsp;31, 2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%">Cost&nbsp;of&nbsp;revenues</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">364,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">235,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Research and development</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">339,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">339,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Selling, general and administrative</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,320,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,197,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total stock-based compensation</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,023,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,771,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At March&nbsp;31, 2016, there were unrecognized
compensation costs of $1,958,000 related to stock options which are expected to be recognized over a weighted-average amortization
period of 1.42&nbsp;years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">No income tax benefit has been recognized relating to stock-based
compensation expense and no tax benefits have been realized from exercised stock options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

<!-- Field: Page; Sequence: 101; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->21<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Stock-Based Award Activity</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Stock-based awards outstanding at March&nbsp;31,
2016 under the various plans are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 66%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="font-weight: bold; border-bottom: Black 1pt solid; text-align: left">Plan</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Awards Outstanding</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD COLSPAN="2" STYLE="text-align: left"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2004 Plan</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD COLSPAN="2" STYLE="text-align: left"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2006 Plan</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">859,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD COLSPAN="2" STYLE="text-align: left"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2011 Plan</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,909,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; width: 1%">&nbsp;</TD><TD STYLE="text-align: left; width: 44%">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left; width: 1%">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; width: 2%">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left; width: 1%">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right; width: 16%">3,769,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left; width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD COLSPAN="2" STYLE="text-align: left"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Awards available for grant as of March&nbsp;31, 2016</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,917,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Stock options award activity is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number of<BR> Shares</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted-<BR> Average<BR> Exercise Price</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted-<BR> Average<BR> Contractual Term</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Aggregate<BR> Intrinsic<BR> Value</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 32%">Outstanding at April 1, 2015</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">2,877,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">6.96</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Options granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,421,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.18</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Options exercised</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Options forfeited</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(190,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.23</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Options expired</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(339,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">16.25</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Outstanding at March 31, 2016</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,769,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4.18</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7.80</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">Exercisable at March 31, 2016</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,075,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5.97</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6.84</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The aggregate intrinsic value of stock options is calculated as
the difference between the exercise price of the underlying stock options and the fair value of the Company&rsquo;s common stock,
or $0.95 per share at March 31, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Restricted stock award activity is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Number&nbsp;of</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Shares</B></P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Weighted</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Average&nbsp;Award</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Date&nbsp;Fair&nbsp;Value</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>per&nbsp;Share</B></P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Unvested restricted stock awards outstanding at April 1, 2015</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; text-align: left">Restricted stock awards granted</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">65,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">0.99</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Restricted stock awards vested</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(65,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.99</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Restricted stock awards forfeited</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Unvested restricted stock awards outstanding at March&nbsp;31, 2016</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 9.9pt 0 10pt; text-align: justify">Restricted stock activities were
issued to non-employee directors for year ended March&nbsp;31, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company did not capitalize any cost associated with stock-based
compensation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company issues new shares of common stock
upon exercise of stock based awards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 102; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->22<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE&nbsp;15&nbsp;&ndash; Income Taxes</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has the following net deferred
tax assets:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Deferred tax assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt; width: 66%">Net operating loss carryforwards</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">36,454,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">36,661,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Research and development tax credit carryforwards</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,710,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,667,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Stock-based compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,083,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,880,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Reserves and accruals</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,111,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,731,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Other deferred tax assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">241,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">49,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">State income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Basis difference in assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 30pt; text-indent: -10pt">Total deferred tax assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">44,606,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">44,992,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Deferred tax liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Unrealized gain on Ruthigen</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,105,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net deferred tax asset</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">44,606,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">43,887,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Valuation allowance</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(44,606,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(43,887,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net deferred tax asset</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&rsquo;s recorded income tax expense,
net of the change in the valuation allowance, for each of the periods presented is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Years&nbsp;Ended&nbsp;March&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left">Income tax (benefit)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(719,000</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(2,613,000</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">Change in valuation allowance</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">719,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,613,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net income tax expense</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A reconciliation of the statutory federal income
tax rate to the Company&rsquo;s effective tax rate is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Years&nbsp;Ended&nbsp;March&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left">Expected federal statutory rate</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">(34.0%</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">(34.0%</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">State income taxes, net of federal benefit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1.8%</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1.8%</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Research and development credit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.4%</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.2%</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Foreign earnings taxed at different rates</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.7%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.5%</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Effect of state net operating loss expiration</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.5%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Effect of permanent differences</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3.3%</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(20.6%</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Impact of foreign exchange rate fluctuations on foreign deferred income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8.5%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">25.0%</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Impact of change in foreign net operating loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6.3%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(9.6%</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left"> Cancellation of stock options and other true-ups</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2.7%</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Adjustment of NOL due to Ruthigen deconsolidation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8.6%</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">True-up of state deferred assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">11.4%</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">3.0%</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7.1%</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(31.8%</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Change in valuation allowance</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7.1%</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">31.8%</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Totals</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0.0%</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0.0%</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<!-- Field: Page; Sequence: 103; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->23<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At March 31, 2016, the Company had net operating loss carryforwards
for federal, state and foreign income tax purposes of approximately $92,883,000, $42,588,000 and $11,666,000, respectively. The
federal net operating loss carryforwards will expire at various dates, if not utilized, beginning in the fiscal year ending March
31, 2021. The state net operating loss carryforwards will expire at various dates, if not utilized, beginning in the fiscal year
ending March 31, 2018. The foreign net operating loss carryforwards will expire at various dates, if not utilized, beginning in
the fiscal year ending March 31, 2018. The Company also had, at March 31, 2016, federal and state research credit carryforwards
of approximately $870,000 and $790,000, respectively. The federal credits will expire, if not utilized at various dates, beginning in the fiscal year ending March 31, 2026, and the state credits do not expire. The Company also had, at March
31, 2016 foreign tax credits carryforwards of approximately $50,000. The foreign credits will expire, if not utilized at various
dates, beginning in the fiscal year ending March 31, 2024.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has completed a study to
assess whether a change in control has occurred or whether there have been multiple changes of control since the
Company&rsquo;s formation through March 31, 2016. The Company determined, based on the results of the study, no change in
control occurred for purposes of Internal Revenue Code section 382. The Company, after considering all available evidence,
fully reserved for these and its other deferred tax assets since it is more likely than not such benefits will not be
realized in future periods. The Company has incurred losses for both financial reporting and income tax purposes for the year
ended March 31, 2016. Accordingly, the Company is continuing to fully reserve for its deferred tax assets. The Company will
continue to evaluate its deferred tax assets to determine whether any changes in circumstances could affect the realization
of their future benefit. If it is determined in future periods that portions of the Company&rsquo;s deferred income tax
assets satisfy the realization standards, the valuation allowance will be reduced accordingly.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a result of certain realization requirements
of Accounting Standards Codification Topic 718, the table of deferred tax assets and liabilities shown above does not include certain
deferred tax assets at March 31, 2016 that arose directly from tax deductions related to equity compensation in excess of compensation
recognized for financial reporting purposes. Equity will be increased by approximately $533,000 if and when such deferred tax assets
are ultimately realized.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company only recognizes tax benefits from
an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities,
based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are
measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution.
To date, the Company has not recognized such tax benefits in its consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has identified its federal tax
return and its state tax return in California as major tax jurisdictions. The Company also filed tax returns in foreign jurisdictions,
principally Mexico and The Netherlands. The Company&rsquo;s evaluation of uncertain tax matters was performed for tax years ended
through March 31, 2016. Generally, the Company is subject to audit for the years ended March 31, 2015, 2014 and 2013 and may be
subject to audit for amounts relating to net operating loss carryforwards generated in periods prior to March 31, 2015. The Company
has elected to retain its existing accounting policy with respect to the treatment of interest and penalties attributable to income
taxes, and continues to reflect interest and penalties attributable to income taxes, to the extent they arise, as a component of
its income tax provision or benefit as well as its outstanding income tax assets and liabilities. The Company believes that its
income tax positions and deductions would be sustained on audit and does not anticipate any adjustments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company does not have any tax positions
for which it is reasonably possible the total amount of gross unrecognized tax benefits will increase or decrease within 12 months
of March 31, 2016. The unrecognized tax benefits may increase or change during the next year for items that arise in the ordinary
course of business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE&nbsp;16&nbsp;&ndash; Employee Benefit
Plan</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has a program to contribute and
administer a qualified 401(k) plan. Under the 401(k) plan, the Company matches employee contributions to the plan up to 4% of the
employee&rsquo;s salary. Company contributions to the plans amounted to an aggregate of $158,000 and $137,000 for the years ended
March 31, 2016 and 2015, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 104; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->24<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE&nbsp;17&nbsp;&ndash; Geographic Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company generates product revenues from
products which are sold into the human and animal healthcare markets, and the Company generates service revenues from laboratory
testing services which are provided to medical device manufacturers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows the Company&rsquo;s
product revenues by geographic region:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Year Ended March 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">$ Change</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">% Change</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 32%; text-align: left">United States</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">4,371,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,978,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">2,393,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">121%</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Latin America</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,965,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,053,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(88,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2%</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Europe and Rest of the World</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,706,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,908,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">798,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">27%</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13,042,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,939,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,103,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">31%</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Product license fees and royalties</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">981,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,056,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,075,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(68%</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">14,023,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">12,995,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,028,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">8%</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In the year ended March 31, 2016, product license
fees and royalties revenue declined primarily as a result of the termination of the Company&rsquo;s agreement with its former partner
Innovacyn and a decrease in the amortization of upfront fees paid by Laboratorios Sanfer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows the Company&rsquo;s
product license fees and royalties revenue by partner:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Year Ended March 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">$ Change</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">% Change</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 32%">Exeltis/Quinnova</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">201,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">437,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(236,000</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">(54%</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Innovacyn</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">29,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,120,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,091,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(97%</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Laboratorios Sanfer</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">751,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,499,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(748,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(50%</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">981,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,056,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(2,075,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(68%</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&rsquo;s service revenues amounted
to $1,061,000 and $859,000 for the years ended March 31, 2016 and 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE&nbsp;18&nbsp;&ndash; Subsequent Events</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 29, 2015, the Company&rsquo;s stockholders approved
an amendment to the Restated Certificate of Incorporation, as amended, and authorized the Company&rsquo;s Board of Directors, if
in their judgment it is necessary, to effect a reverse stock split of our outstanding common stock, $0.0001 par value per share,
at a whole number ratio in the range of 1-for-5 to 1-for-9, such ratio to be determined in the discretion of the Board of Directors,
and to proportionally decrease the total number of shares that the Company is authorized to issue by a factor of 1-for-5 to 1-for-9,
such ratio to be determined in the sole discretion of the Board of Directors. On June 2, 2016, the Company&rsquo;s Board of Directors
approved the reverse stock split with a ratio of 1-for-5 and authorized the Corporation to take all steps necessary to effect the
reverse stock split to become effective June 24, 2016.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><B><I></I></B></P>

<!-- Field: Page; Sequence: 105; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: left"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="a_003" TITLE="balance"></A>Condensed Consolidated Balance Sheets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(In thousands, except share and per share amounts)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">March 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">(Unaudited)</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: center; padding-left: 10pt; text-indent: -10pt">ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Current assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left; padding-left: 20pt; text-indent: -10pt">Cash and cash equivalents</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">18,983</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">7,469</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Restricted cash (Note 4)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Accounts receivable, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,977</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,508</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Inventories, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,066</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,595</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Prepaid expenses and other current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">362</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,505</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Current portion of deferred consideration, net of discount</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">239</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Current assets of discontinued operations (Note 4)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">811</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Total current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">25,127</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,888</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Property and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">798</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">850</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Deferred consideration, net of discount, less current portion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,509</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Other assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">73</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">65</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 30pt; text-indent: -10pt">Total assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">27,507</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">13,803</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: center; padding-left: 10pt; text-indent: -10pt">LIABILITIES AND STOCKHOLDERS&rsquo; EQUITY</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Current liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,092</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,337</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Accrued expenses and other current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,626</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,526</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Deferred revenue</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">794</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">274</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Current portion of long-term debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">114</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Taxes payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">229</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Current liabilities of discontinued operations (Note 4)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">300</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Total current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,753</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,551</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Long-term deferred revenue</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">531</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Long-term debt, less current portion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Deferred tax liability</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">312</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Long-term liabilities of discontinued operations (Note 4)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">112</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 30pt; text-indent: -10pt">Total liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,644</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,663</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Commitments and Contingencies (Note 6)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Stockholders&rsquo; Equity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -20pt">Convertible preferred stock, $0.0001 par value; 714,286 shares authorized, none issued and outstanding at December 31, 2016 and March 31, 2016, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -20pt">Common stock, $0.0001 par value; 12,000,000 shares authorized at December 31, 2016 and March 31, 2016, 4,257,754 (unaudited) and 4,196,873 shares issued and outstanding at December 31, 2016 and March 31, 2016, respectively (Note 7)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">168,198</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">166,368</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Accumulated deficit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(140,665</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(152,375</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Accumulated other comprehensive loss</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,671</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,854</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 30pt; text-indent: -10pt">Total stockholders&rsquo; equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">22,863</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,140</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 30pt; text-indent: -10pt">Total liabilities and stockholders&rsquo; equity</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">27,507</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">13,803</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">The accompanying footnotes are an integral part
of these condensed consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>


<!-- Field: Page; Sequence: 106; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->26<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="a_004" TITLE="income"></A>Condensed Consolidated Statements of Comprehensive
Income (Loss)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(In thousands, except per share amounts)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Unaudited)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Three Months Ended<BR> December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Nine Months Ended<BR> December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Revenues</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 48%; padding-left: 20pt; text-indent: -10pt">Product</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">3,174</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">2,212</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">8,158</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">5,708</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Product licensing fees and royalties</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">44</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">231</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Service</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">187</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">227</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">638</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">855</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 30pt; text-indent: -10pt">Total revenues</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,361</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,483</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8,796</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,794</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Cost of revenues</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Product</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,476</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,851</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,507</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,402</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Service</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">179</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">177</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">568</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">715</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 30pt; text-indent: -10pt">Total cost of revenues</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,655</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,028</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,075</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,117</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Gross profit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,706</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">455</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,721</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,677</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Operating expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Research and development</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">487</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">486</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,226</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,365</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Selling, general and administrative</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,784</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,158</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,557</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">11,411</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 30pt; text-indent: -10pt">Total operating expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,271</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,644</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">13,783</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,776</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Loss from operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,565</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,189</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(10,062</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(11,099</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Interest expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Interest income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Gain due to change in fair value of derivative liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Tax benefit (Note 4)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,040</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,040</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Other income (expense), net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">282</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(29</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">276</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">31</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Income (loss) from continuing operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">763</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,214</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,740</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(11,058</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Income from discontinued operations
    (net of tax) (Note 4)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">15,465</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,065</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">17,450</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,806</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">Net income (loss)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">16,228</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,149</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,710</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(7,252</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-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Net income (loss) per share: basic</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 10pt">Continuing operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.18</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(1.28</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(1.36</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(3.46</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 10pt">Discontinued operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3.66</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.32</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4.15</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1.19</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3.84</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.96</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2.78</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(2.27</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">Weighted-average number of shares used in per share calculations: basic</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,225</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,293</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,209</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,195</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Net income (loss) per share: diluted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Continuing operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.18</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(1.28</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(1.36</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(3.46</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Discontinued operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3.66</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.32</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4.15</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1.19</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3.84</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.96</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2.78</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(2.27</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">Weighted-average number of shares used in per share calculations: diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,228</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,293</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,209</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,195</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Other comprehensive income (loss)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Net income (loss)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">16,228</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(3,149</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">11,710</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(7,252</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Foreign currency translation adjustments</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(416</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(68</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(817</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(392</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 20pt; text-indent: -10pt">Comprehensive income (loss)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">15,812</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,217</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,893</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(7,644</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">The accompanying footnotes are an integral
part of these condensed consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>

<!-- Field: Page; Sequence: 107; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->27<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><A NAME="a_005" TITLE="cashflow"></A><B>Condensed Consolidated Statements of Cash
Flows</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(In thousands)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Unaudited)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Nine Months&nbsp;Ended&nbsp;December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">(In&nbsp;thousands)</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 10pt; text-indent: -10pt">Cash flows from operating activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; text-align: left; padding-left: 10pt; text-indent: -10pt">Net loss from continuing operations</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(5,740</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(11,058</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Net income from discontinued operations, net of tax</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">17,450</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,806</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Net income (loss)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,710</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,252</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Depreciation and amortization</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">178</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">182</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Gain on sale of Latin American assets, net of tax</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(14,906</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Income tax benefit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,040</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Stock-based compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,732</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,459</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Service provider expenses settled with common stock</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">98</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">190</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Gain due to change in fair value of derivative liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(10</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Foreign currency transaction gains</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(13</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(42</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Changes in operating assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 40pt; text-indent: -10pt">Accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(105</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,351</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 40pt; text-indent: -10pt">Inventories</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(644</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(319</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 40pt; text-indent: -10pt">Prepaid expenses and other current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,104</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(106</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 40pt; text-indent: -10pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(205</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">569</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 40pt; text-indent: -10pt">Accrued expenses and other current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">86</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">277</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 40pt; text-indent: -10pt">Deferred revenue</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(467</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(621</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Net cash (used in) operating activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,472</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(7,024</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 10pt; text-indent: -10pt">Cash flows from investing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Purchases of property and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(195</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(353</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Proceeds from sale of long-term investment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,538</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Proceeds from sale of Latin American assets, net of costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,444</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Deposits</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(17</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Net cash provided by investing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">17,232</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,180</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 10pt; text-indent: -10pt">Cash flows from financing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Proceeds from issuance of common stock, net of offering costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,949</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Proceeds from exercise of common stock purchase warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Principal payments on long-term debt</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(119</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(87</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Net cash (used in) provided by financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(119</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,876</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Effect of exchange rate on cash and cash equivalents</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(127</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(55</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Net increase (decrease) in cash and cash equivalents</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,514</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(23</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Cash and cash equivalents, beginning of period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,469</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,136</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">Cash and cash equivalents, end of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">18,983</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,113</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 10pt; text-indent: -10pt">Supplemental disclosure of cash flow information:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 30pt; text-indent: -10pt">Cash paid for interest</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 10pt; text-indent: -10pt">Non-cash operating and financing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Issuance of common stock to settle obligation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">96</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Sale to Invekra:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Assets acquired and liabilities assumed:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Restricted cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Deferred consideration &ndash; current, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">239</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Deferred consideration &ndash; long-term, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,509</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Taxes payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(229</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Deferred tax liability</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(312</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Deferred revenue &ndash; current</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(674</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Deferred revenue &ndash; long-term</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(531</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 20pt; padding-left: 10pt">Total non-cash items</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,502</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">The accompanying footnotes are an integral part
of these condensed consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 6pt 0 0">&nbsp;</P>


<!-- Field: Page; Sequence: 108; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->28<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><A NAME="a_006" TITLE="notes"></A><B>Notes to Condensed Consolidated Financial
Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Unaudited)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Note 1.</B></FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Organization and Recent Developments</B></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Organization</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Sonoma Pharmaceuticals, Inc., formerly known
as Oculus Innovative Sciences, Inc., (the &ldquo;Company&rdquo;) was incorporated under the laws of the State of California in
April 1999 and was reincorporated under the laws of the State of Delaware in December 2006. The Company&rsquo;s principal office
is located in Petaluma, California. The Company is a specialty pharmaceutical company that develops and markets solutions for the
treatment of dermatological conditions and advanced tissue care. The Company&rsquo;s products, which are sold throughout the United
States and 39 countries around the world, have improved patient outcomes for more than five million patients globally by reducing
infections, itch, pain, scarring, odor and harmful inflammatory responses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Effective December
6, 2016, the Company changed its name from Oculus Innovative Sciences, Inc. to Sonoma Pharmaceuticals, Inc. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Basis of Presentation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying unaudited condensed consolidated
financial statements as of December 31, 2016 and for the three and nine months then ended have been prepared in accordance with
the accounting principles generally accepted in the United States of America for interim financial information and pursuant to
the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (&ldquo;SEC&rdquo;) and
on the same basis as the Company prepares its annual audited consolidated financial statements. The unaudited condensed consolidated
balance sheet as of December 31, 2016, the condensed consolidated statements of comprehensive loss for the three and nine months
ended December 31, 2016 and 2015, and the condensed consolidated statements of cash flows for the nine months ended December 31,
2016 and 2015 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers
necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The results
for the three and nine months ended December 31, 2016 are not necessarily indicative of results to be expected for the year ending
March 31, 2017 or for any future interim period. The condensed consolidated balance sheet at March 31, 2016 has been derived from
audited consolidated financial statements. However, it does not include all of the information and notes required by accounting
principles generally accepted in the United States of America for complete consolidated financial statements. The accompanying
condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year
ended March 31, 2016, and notes thereto included in the Company&rsquo;s annual report on Form 10-K, which was filed with the SEC
on June 21, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Reverse Stock Split</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Effective June 24, 2016, the Company effected
a reverse stock split of its common stock, par value $0.0001 per share. Every 5 shares of common stock were reclassified and combined
into one share of common stock. No fractional shares were issued as a result of the reverse stock split. Instead, stockholders
entitled to receive fractional shares received cash in the amount equal to the closing price per share of the Company&rsquo;s common
stock as reported on the NASDAQ Capital Market as of 5:00 p.m. Eastern Time on June 24, 2016, multiplied by the fraction of one
share owned by the stockholder. The reverse stock split reduced the number of shares of the Company&rsquo;s common stock outstanding
from 21,004,857 to 4,200,756. The total number of authorized shares of common stock was also proportionally decreased by a ratio
of 1:5 and the par value per share of the common stock continued to be $0.0001.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">All common shares and per share amounts contained
in the condensed consolidated financial statements have been retroactively adjusted to reflect a 1 for 5 reverse stock split.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 6pt 0 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Note 2.</B></FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Liquidity and Financial Condition</B></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company reported a net income of $11,710,000
for the nine months ended December 31, 2016. At December 31, 2016 and March 31, 2016, the Company&rsquo;s accumulated deficit amounted
to $140,665,000 and $152,375,000, respectively. The Company had working capital of $21,374,000 and $9,337,000 as of December 31,
2016 and March 31, 2016, respectively. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 109; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->29<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">On October 27, 2016,
the Company, along with its Mexican subsidiary and manufacturer Oculus Technologies of Mexico, S.A. de C.V. (&ldquo;OTM&rdquo;),
closed on an asset purchase agreement with Invekra, S.A.P.I de C.V. (&ldquo;Invekra&rdquo;), an affiliate of Laboratorios Sanfer
S.A. de C.V., for the sale of certain of its Latin America assets. Specifically, the Company agreed to sell certain patents, patent
applications, trademarks and territory rights for Mexico, the Caribbean and South America, excluding the sale of dermatology products
in Brazil, as well as to build and deliver equipment that Invekra will use to produce its own product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The aggregate purchase price that Invekra
will pay for the assets is $22,000,000, of which $18,000,000 was paid upon closing, $1,500,000 will be held in escrow until completion
of the Company&rsquo;s obligations to deliver certain equipment, and $2,500,000 will be paid in Mexican currency in quarterly
installments over a period of ten years from closing as consideration for the provision of certain services and providing technical
assistance, calculated as three per cent on net sales of certain products in Latin America, excluding Mexico. Because the $2,500,000
is to be paid in foreign currency, the Company may receive more or less than $2,500,000 due to currency fluctuations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The Company currently
anticipates that its cash and cash equivalents will be sufficient to meet its working capital requirements to continue its sales
and marketing and research and development efforts for at least 12 months from the date of filing this quarterly report.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 7%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Note 3.</B></FONT></TD>
    <TD STYLE="width: 93%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Summary of Significant Accounting Policies</B></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Use of Estimates</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of condensed consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities
at the dates of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from these estimates. Significant estimates and assumptions include reserves and write-downs
related to receivables and inventories, the recoverability of long-lived assets, the valuation allowance relating to the Company&rsquo;s
deferred tax assets, valuation of equity and derivative instruments, debt discounts, valuation of investments, determination of
the relative selling prices of the components sold to Invekra, and the estimated amortization periods of upfront product licensing
fees received from customers. Periodically, the Company evaluates and adjusts estimates accordingly. The allowance for doubtful
accounts represents probable credit losses of $37,000 and $15,000 at December 31, 2016 and March 31, 2016, respectively. Additionally
at December 31, 2016 and March 31, 2016 the Company has allowances of $1,061,000 and $653,000, respectively, related to potential
discounts, returns, distributor fees and rebates. The allowances are included in Accounts Receivable, net in the accompanying condensed
consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Basic and Diluted Net Income (Loss) per common share</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic earnings and loss per share for both
continuing and discontinued operations are computed by dividing the net income or loss available to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted
average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares
consist of the incremental common shares issuable upon the exercise of stock options (using the treasury stock method) and warrants
(using the if-converted method). Diluted loss per share excludes the shares issuable upon the exercise of stock options and warrants
from the calculation of net loss per share as their effect would be anti-dilutive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Three Months Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Nine Months Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt"></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Numerator:</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 48%; text-align: left; padding-left: 10pt; text-indent: -10pt">Income (loss) from continuing operations</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">763,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">(4,214,000</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">(5,740,000</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">(11,058,000</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Income from discontinued operations (net of tax)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">15,465,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,065,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">17,450,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,806,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">Net income (loss)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">16,228,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,149,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,710,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(7,252,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Denominator:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Weighted-average number of common shares outstanding - basic</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,225,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,293,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,209,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,195,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 30pt; text-indent: -10pt">Options to purchase common stock</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">Weighted-average number of common shares outstanding - diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,228,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,293,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,209,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,195,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Basic &ndash; income (loss) from continuing operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.18</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(1.28</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(1.36</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(3.46</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Basic &ndash; income from discontinued operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3.66</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.32</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4.15</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1.19</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3.84</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.96</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2.78</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(2.27</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Diluted &ndash; income (loss) from continuing operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.18</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(1.28</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(1.36</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(3.46</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Diluted &ndash; income from discontinued operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3.66</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.32</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4.15</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1.19</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3.84</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.96</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2.78</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(2.27</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 110; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->30<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following securities were excluded from
the weighted average dilutive common shares outstanding because their inclusion would have been antidilutive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Three Months Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Nine Months Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 48%; text-align: left; padding-left: 10pt; text-indent: -10pt">Options to purchase common stock</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">848,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">740,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">851,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">740,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Warrants to purchase common stock</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,365,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,265,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,365,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,265,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,213,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,005,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,216,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,005,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Common Stock Purchase Warrants and Other
Derivative Financial Instruments</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company classifies common stock purchase
warrants and other free standing derivative financial instruments as equity if the contracts (i) require physical settlement or
net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement
or net-share settlement). The Company classifies any contracts that (i) require net-cash settlement (including a requirement to
net cash settle the contract if an event occurs and if that event is outside the control of the Company), (ii) give the counterparty
a choice of net cash settlement or settlement in shares (physical settlement or net-share settlement), or (iii) contain reset provisions
as either an asset or a liability. The Company assesses classification of its freestanding derivatives at each reporting date to
determine whether a change in classification between assets and liabilities is required. The Company determined that its freestanding
derivatives, which principally consist of warrants to purchase common stock, satisfied the criteria for classification as equity
instruments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Revenue Recognition and Accounts Receivable</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company generates revenue from sales of
its products to a customer base including hospitals, medical centers, doctors, pharmacies, distributors and wholesalers. The Company
sells products directly to end users and to distributors. The Company also entered into agreements to license its technology and
products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company also provides regulatory compliance
testing and quality assurance services to medical device and pharmaceutical companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company records revenue when (i)&nbsp;persuasive
evidence of an arrangement exists, (ii)&nbsp;delivery has occurred, (iii)&nbsp;the fee is fixed or determinable, and (iv)&nbsp;collectability
of the sale is reasonably assured.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company requires all product sales to be
supported by evidence of a sale transaction that clearly indicates the selling price to the customer, shipping terms and payment
terms. Evidence of an arrangement generally consists of a contract or purchase order approved by the customer. The Company has
ongoing relationships with certain customers from which it customarily accepts orders by telephone in lieu of purchase orders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes revenue at the time
it receives confirmation that the goods were either tendered at their destination, when shipped &ldquo;FOB destination,&rdquo;
or transferred to a shipping agent, when shipped &ldquo;FOB shipping point.&rdquo; Delivery to the customer is deemed to have occurred
when the customer takes title to the product. Generally, title passes to the customer upon shipment, but could occur when the customer
receives the product based on the terms of the agreement with the customer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 111; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->31<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The selling prices of all goods are fixed,
and agreed to with the customer, prior to shipment. Selling prices are generally based on established list prices. The right to
return product is customarily based on the terms of the agreement with the customer. The Company estimates and accrues for potential
returns and records this as a reduction of revenue in the same period the related revenue is recognized. Additionally, distribution
fees are paid to certain wholesale distributors based on contractually determined rates. The Company estimates and accrues the
fee on shipment to the respective wholesale distributors and recognizes the fee as a reduction of revenue in the same period the
related revenue is recognized. The Company also offers cash discounts to certain customers, generally 2% of the sales price, as
an incentive for prompt payment. The Company accounts for cash discounts by reducing accounts receivable by the prompt pay discount
amount and recognizes the discount as a reduction of revenue in the same period the related revenue is recognized. Additionally,
the Company participates in certain rebate programs which provide discounted prescriptions to qualified patients. The Company contracts
with a third-party to administer the program. The Company estimates and accrues for future rebates based on historical data for
rebate redemption rates and the historical value of redemptions. Rebates are recognized as a reduction of revenue in the same period
the related revenue is recognized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company evaluates the creditworthiness
of new customers and monitors the creditworthiness of its existing customers to determine whether an event or changes in their
financial circumstances would raise doubt as to the collectability of a sale at the time in which a sale is made. Payment terms
on sales made in the United States are generally 30&nbsp;days and are extended up to 90 days for initial product launches, payment
terms internationally generally range from prepaid prior to shipment to 90&nbsp;days.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In the event a sale is made to a customer under
circumstances in which collectability is not reasonably assured, the Company either requires the customer to remit payment prior
to shipment or defers recognition of the revenue until payment is received. The Company maintains a reserve for amounts which may
not be collectible due to risk of credit losses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Product license revenue is generated through
agreements with strategic partners for the commercialization of Microcyn&reg; products. The terms of the agreements sometimes include
non-refundable upfront fees. The Company analyzes multiple element arrangements to determine whether the elements can be separated.
Analysis is performed at the inception of the arrangement and as each product is delivered. If a product or service is not separable,
the combined deliverables are accounted for as a single unit of accounting and recognized over the performance obligation period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">When appropriate, the Company defers recognition
of non-refundable upfront fees. If the Company has continuing performance obligations then such up-front fees are deferred and
recognized over the period of continuing involvement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes royalty revenues from
licensed products upon the sale of the related products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenue from consulting contracts is recognized
as services are provided. Revenue from testing contracts is recognized as tests are completed and a final report is sent to the
customer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Inventories</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories are stated at the lower of cost,
cost being determined on a standard cost basis (which approximates actual cost on a first-in, first-out basis), or market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Due to changing market conditions, estimated
future requirements, age of the inventories on hand and production of new products, the Company regularly reviews inventory quantities
on hand and records a provision to write down excess and obsolete inventory to its estimated net realizable value. The Company
recorded reserves to reduce the carrying amounts of inventories to their net realizable value in the amounts of $183,000 and $164,000
at December 31, 2016 and March 31, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Income Taxes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company is required to determine the aggregate
amount of income tax expense or loss based upon tax statutes in jurisdictions in which it conducts business. In making these estimates,
the Company adjusts its results determined in accordance with generally accepted accounting principles for items that are treated
differently by the applicable taxing authorities. Deferred tax assets and liabilities resulting from these differences are reflected
on its balance sheet for temporary differences in loss and credit carryforwards that will reverse in subsequent years. The Company
also establishes a valuation allowance against deferred tax assets when it is more likely than not that some or all of the deferred
tax assets will not be realized. Valuation allowances are based, in part, on predictions that management must make as to the results
in future periods. The outcome of events could differ over time which would require that the Company makes changes in its valuation
allowance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Financial Assets and Liabilities</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses and other liabilities are carried at cost, which management
believes approximates fair value due to the short-term nature of these instruments. The fair value of capital lease obligations
and equipment loans approximates their carrying amounts as a market rate of interest is attached to their repayment. The Company
measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes
the use of unobservable inputs when measuring fair value. The Company uses three levels of inputs that may be used to measure fair
value:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 112; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level&nbsp;1&nbsp;&ndash; quoted prices in
active markets for identical assets or liabilities</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level&nbsp;2&nbsp;&ndash; quoted prices for
similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active;
and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level&nbsp;3&nbsp;&ndash; inputs that are unobservable
(for example cash flow modeling inputs based on assumptions)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 3 liabilities are valued using unobservable
inputs to the valuation methodology that are significant to the measurement of the fair value of the liabilities. For fair value
measurements categorized within Level 3 of the fair value hierarchy, the Company&rsquo;s accounting and finance department, who
report to the Chief Financial Officer, determine its valuation policies and procedures. The development and determination of the
unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company&rsquo;s
accounting and finance department and are approved by the Chief Financial Officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2016 and March 31, 2016,
there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Subsequent Events</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Management has evaluated subsequent events
or transactions occurring through the date the condensed consolidated financial statements were issued (See Subsequent Events Note
12).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Recent Accounting Pronouncements</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2016, the FASB issued ASU 2016-01&nbsp;Financial
Instruments-Overall, which address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.
The amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within
those fiscal years.&nbsp;Earlier application is permitted under specific circumstances. The Company is currently assessing the
potential impact of this standard on its financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash
Flows (Topic 230). This amendment will provide guidance on the presentation and classification of specific cash flow items to improve
consistency within the statement of cash flows. ASU 2016-15 is effective for fiscal years, and interim periods within those fiscal
years beginning after December 15, 2017, with early adoption permitted. The Company is evaluating the effect that ASU 2016-15 will
have on its financial statements and related disclosures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In November 2016, the FASB issued ASU No. 2016-18, Statement of
Cash Flows (Topic 230): Restricted Cash (&ldquo;ASU 2016-18&rdquo;) that changes the presentation of restricted cash and cash equivalents
on the statement of cash flows. Restricted cash and restricted cash equivalents will be included with cash and cash equivalents
when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective
for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years,
but early adoption is permissible. The Company is currently evaluating the potential impact that ASU 2016-18 may have on its financial
position and statement of cash flows.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounting standards that have been issued
or proposed by the Financial Accounting Standards Board (&ldquo;FASB&rdquo;), SEC and/or other standards-setting bodies that do
not require adoption until a future date are not expected to have a material impact on the condensed consolidated financial statements
upon adoption.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 7%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Note 4.</B></FONT></TD>
    <TD STYLE="width: 93%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Disposition of Latin American Operations</B></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt"><B><I>Description of Sale to Invekra</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">On October 27, 2016,
the Company, along with its Mexican subsidiary and manufacturer Oculus Technologies of Mexico, S.A. de C.V. (&ldquo;OTM&rdquo;),
closed on an asset purchase agreement with Invekra, S.A.P.I de C.V. (&ldquo;Invekra&rdquo;), an affiliate of Laboratorios Sanfer
S.A. de C.V., for the sale of certain of its Latin America assets. Specifically, the Company agreed to sell certain patents, patent
applications, trademarks and territory rights for Mexico, the Caribbean and South America, excluding the sale of dermatology products
in Brazil, as well as to build and deliver equipment that Invekra will use to produce its own product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>


<!-- Field: Page; Sequence: 113; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->33<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The aggregate purchase price that Invekra will
pay for the assets is $22,000,000, of which $18,000,000 was paid upon closing, $1,500,000 will be held in escrow until completion
of the Company&rsquo;s obligations to deliver certain equipment, and $2,500,000 will be paid in Mexican currency in quarterly installments
over a period of ten years from closing as consideration for the provision of certain services and providing technical assistance,
calculated as three per cent on net sales of certain products in Latin America, excluding Mexico. Because the $2,500,000 is to
be paid in foreign currency, the Company may receive more or less than $2,500,000 due to currency fluctuations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the asset purchase agreement,
the Company agreed to provide the technology, know-how and assistance to Invekra to enable Invekra to manufacture on its own the
products as currently produced by the Company (&ldquo;Technical Services Arrangement&rdquo;), and continue to supply product to
Invekra for a two year transition period from the Sale Date, subject to mutual extension (&ldquo;Supply Agreement&rdquo;). During
the three and nine months ended December 31, 2016, the Company reported $465,000 of Latin America product revenue related to the
Supply Agreement with Invekra.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company will provide product under the
Supply Agreement at a reduced price from its current price list, while Invekra builds its own manufacturing line. At the conclusion
of the transition period, the Company will cease to be a supplier of product to Invekra. The Company is uncertain as to the duration
of the transition period or when Invekra will complete the build out of its manufacturing line. Pursuant to the Supply Agreement
the Company is subject to a potential penalty for failure to supply the products for a consecutive period of six months. The penalty,
if triggered, will require the Company to make a one-time payment of $2,000,000 to Invekra. The penalty decreases by 12.5% each
quarter of the term of the supply period. The Company does not expect to incur this penalty. The Company will incur costs of approximately
$325,000 to fulfill its obligations to build and deliver certain production equipment to Invekra.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Accounting for the disposition</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For accounting purposes, the Company determined that there were
three discrete components of the sale to Invekra. These components were the intellectual property and territory rights, the services
to be provided under the Technical Services Arrangement and the production equipment to be manufactured for Invekra.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company determined an arm&rsquo;s length selling price for each
component of the sale and then allocated the net proceeds received to the components on a relative selling price basis. The Company
estimated the selling prices of each component as described below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 37%; text-decoration: underline"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><U>Component of Sale</U></FONT></TD>
    <TD STYLE="width: 63%; text-decoration: underline"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><U>Methodology to Estimate Selling Price</U></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Services under the Technical Services Arrangement</FONT></TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Based upon revenues expected from a market participant to provide
        technical services at expected service levels</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Production equipment to be manufactured</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Based upon an expected selling price derived from costs marked up to selling price at market participant margins</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Intellectual property and territory rights</FONT></TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Based upon a discounted cash flow analysis of the benefit
to Invekra of producing rather than purchasing its product and operating royalty free</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt">The Company determined proceeds, net of estimated transaction
costs and net of the discount to adjust for consideration to be received in the future. The total proceeds were as follows:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 57%; padding-left: 10pt; text-indent: -10pt">Cash received on October 27, 2016</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">18,000,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Cash held in escrow until delivery of equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,500,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Face value of variable consideration ($250,000 per year for ten years)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,500,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Total proceeds from sale</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Transaction costs</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">556,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Total proceeds, net of transaction costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21,444,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Discount on variable consideration (using a 7.5% discount rate)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">752,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 30pt; text-indent: -10pt">Total proceeds, net of discount</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">20,692,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>


<!-- Field: Page; Sequence: 114; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->34<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt">Proceeds were allocated to the components of the sale based
upon their relative selling prices are as follows:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 57%; text-align: left">Services under the Technical Services Arrangement</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">708,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Production equipment to be manufactured</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">497,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Intellectual property and territory rights</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">19,487,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 20pt">Total proceeds</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">20,692,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The proceeds related to the intellectual property
and territory rights were included in gain on sale on the date of the sale. The proceeds allocated to the services under the Technical
Services Agreement were recorded in deferred revenue as of the date of the sale and will be recognized as technical services are
provided. The proceeds related to the production equipment to be manufactured were included in deferred gain and will be recognized
upon delivery of the equipment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Discontinued operations</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2016, the Company determined
that the sale of its Latin American operations to Invekra qualified as a sale of a component of its business and, as such, all
such activity prior to consummation of the sale is required to be included in discontinued operations on the Company&rsquo;s statement
of operations. This includes the direct labor and materials for the product delivered to Invekra, the revenue on the sales to Invekra
and the gain on the sale to Invekra, net of tax.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The carrying value of the assets and liabilities of discontinued
operations on the condensed consolidated balance sheets as of December 31, 2016 and March 31, 2016 were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>December 31, </B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>2016</B></P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>March 31, </B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>2016</B></P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-decoration: underline; text-align: center">Assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 50%; text-align: left">Accounts receivable (net)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">766,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt">Inventories</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">45,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 20pt">Total current assets of discontinued operations</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">811,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: 20pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-decoration: underline; text-align: center">Liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Deferred Revenue</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">300,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 20pt">Total current liabilities of discontinued operations</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">300,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: 20pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Deferred Revenue, less current portion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">112,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 20pt">Total Long-term liabilities of discontinued operations</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">112,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The operations of its Latin American business included in
discontinued operations is summarized as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Three Months Ended</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>December 31,</B></P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Nine Months Ended</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>December 31,</B></P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 48%; padding-left: 10pt; text-indent: -10pt">Revenues</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">621,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">1,336,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">3,105,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">4,760,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Cost of Revenues</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">62,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">271,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">561,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">954,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Income from discontinued operations before tax</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">559,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,065,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,544,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,806,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Gain on disposal of discontinued operations before income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">19,487,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">19,487,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Total income from discontinued operations, before tax</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,046,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,065,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,031,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,806,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Income Tax benefit (expense)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,581,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,581,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">Income from discontinued operations, net of tax</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">15,465,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,065,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">17,450,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,806,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>


<!-- Field: Page; Sequence: 115; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->35<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 11%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.8pt 0 0"><B></B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.8pt 0 0"><B>Note 5.</B></P></TD>
    <TD STYLE="width: 89%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.8pt 0 0"><B>Condensed Consolidated Balance Sheets</B></P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Inventories, net</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories, net consist of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">March 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 46%; text-align: left">Raw materials</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,369,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,059,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Finished goods</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">697,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">536,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,066,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,595,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Notes Payable</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 25, 2016, the Company entered into
a note agreement for $146,000 with an interest rate of 6.25% per annum. This instrument was issued in connection with financing
insurance premiums. The note was payable in monthly installments of $16,000. During the three months ended December 31, 2016, the
Company made the final payment of $17,000. During the nine months ended December 31, 2016, the Company made principal and interest
payments of $114,000 and $1,000, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On August 10, 2016, the Company entered into
a note agreement for $26,000 with an interest rate of 2.49% per year, and a monthly payment of $432. This instrument was issued
in connection with the financing of an automobile. During the three months ended December 31, 2016, the Company made principal
and interest payments related to this note in the amounts of $1,149 and $147, respectively. During the nine months ended December
31, 2016, the Company made principal and interest payments related to this note in the amounts of $3,531 (includes a first installment
payment of $2,000) and $197, respectively. The remaining balance of this note amounted to $23,000 at December 31, 2016, of which
$5,000 is included in the current portion of long-term debt in the accompanying condensed consolidated balance sheet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On September 27, 2016, the Company entered
into a note agreement for $38,000 with an interest rate of 0%, and monthly payment of $630. This instrument was issued in connection
with the financing of an automobile. During the three months ended December 31, 2016, the Company made principal payments related
to this note of $1,000. The remaining balance of this note amounted to $37,000 at December 31, 2016, of which $7,000 is included
in the current portion of long-term debt in the accompanying condensed consolidated balance sheet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Note 6.</B></FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Commitments and Contingencies</B></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Legal Matters</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company, on occasion, may be involved in
legal matters arising in the ordinary course of its business including matters involving proprietary technology. While management
believes that such matters are currently insignificant, matters arising in the ordinary course of business for which the Company
is or could become involved in litigation may have a material adverse effect on its business, financial condition or results of
operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Employment Agreements</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 26, 2016, the Company entered into
a new employment agreement with Jim Schutz, its President and Chief Executive Officer to update his agreements and responsibilities.
The terms of the new employment agreement provide for a continued annual base salary of $250,000 or such other amount as the Board
of Directors may set. In addition, Mr. Schutz is eligible to receive an annual bonus, the payment, type and amount of which is
in the sole discretion of the Compensation Committee. Mr. Schutz also receives certain benefits, such as participation in our health
and welfare plans, vacation and reimbursement of expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2016 the Company had employment
agreements in place with five of its key executives. The agreements provide, among other things, for the payment of nine to twenty-four
months of severance compensation for terminations under certain circumstances. With respect to these agreements, at December 31,
2016, aggregated annual salaries would be $1,185,000 and potential severance payments to these key executives would be $1,435,000
if triggered.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 116; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->36<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Note 7.</B></FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Stockholders&rsquo; Equity</B></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Authorized Capital</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company is authorized to issue up to 12,000,000
shares of common stock with a par value of $0.0001 per share and 714,286 shares of convertible preferred stock with a par value
of $0.0001 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Common Stock Issued Services Provider</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On April 24, 2009, the Company entered into
an agreement with Advocos LLC, a contract sales organization that served as part of the Company&rsquo;s sales force, for the sale
of the Company&rsquo;s wound care products in the United States. Pursuant to the agreement, the Company agreed to pay the contract
sales organization a monthly fee and potential bonuses that was based on achievement of certain levels of sales. The Company agreed
to issue the contract sales organization cash or shares of common stock to settle fees for its services. During the nine months
ended December 31, 2015, the Company issued 135,485 shares of common stock, with a fair market value of $203,000, in connection
with this agreement. The Company has determined that the fair value of the common stock was more readily determinable than the
fair value of the services rendered. During the nine months ended December 31, 2015, the Company recorded $107,000 of expense related
to stock issued pursuant to this agreement and settled $96,000 of fees accrued in prior periods. The expense was recorded as selling,
general and administrative expense in the accompanying condensed consolidated statement of comprehensive loss for the nine months
ended December 31, 2015. This agreement was terminated on September 28, 2016. Pursuant to the termination agreement the Company
paid outstanding fees of $111,000, issued 14,390 shares of common stock with a fair value of $69,000, and transferred certain assets
valued at $62,000 related to a product line the Company deemed to be non-core and immaterial to its operations. The expense was
recorded as selling, general and administrative expense in the accompanying condensed consolidated statement of comprehensive loss
for the nine months ended December 31, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On August 1, 2016, the Company entered into
an agreement with CorProminence, LLC. for financial advisory services. Pursuant to the agreement, the Company agreed to pay CorProminence,
LLC. common stock as compensation for services provided. The Company determined that the fair value of the common stock was more
readily determinable than the fair value of the services rendered. Accordingly, the Company recorded the fair market value of the
stock as expense. During the three and nine months ended December 31, 2016, the Company issued 6,411 shares of common stock in
connection with this agreement. During the three and nine months ended December 31, 2016, the Company recorded $29,000 of expense
related to this agreement. The expense was recorded as selling, general and administrative expense in the accompanying condensed
consolidated statements of comprehensive income (loss).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Note 8.</B></FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Stock-Based Compensation</B></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Performance Based Awards Program</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&rsquo;s Compensation Committee
approved a short-term performance based bonus program for fiscal 2016 with predetermined objectives related to revenue and expense
targets. In the event the fiscal 2016 objectives were met, eighty-percent of the options would have vested on June 30, 2016. On
August 21, 2015, certain executives and senior managers were granted an aggregate of 75,500 stock options in connection with this
program. The stock options have an exercise price of $5.80 and expire ten years from the date of grant. At March 31, 2016, it was
determined targets were met related to 50,400 stock options which vested on June 30, 2016. At March 31, 2016, 10,000 stock options
expired due to targets that were not met. The vesting of the remaining 15,100 stock options was at the discretion of the Company&rsquo;s
Compensation Committee to be determined during the three months ended June 30, 2016. The Company&rsquo;s Compensation Committee
determined 14,772 of the 15,100 discretionary stock options vested at June 30, 2016 and 228 of the discretionary stock options
expired unvested.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company also approved a long-term market-based
stock option bonus program for senior managers. Vesting of the stock options granted as part of this program is contingent upon
the achievement of four separate target stock prices. The market-based options vest based on the 30 trading day trailing average
of the stock price of the Company&rsquo;s common stock with options vesting in 25% increments at each of the target stock prices.
On the last day of each quarter, the chief executive officer and/or chief financial officer will determine if any of the target
stock prices have been met by evaluating the period between the quarter end date and the grant date of the option. In the event
that a target stock price has been met, the senior manager will be notified that such options have vested. At the end of five years
from the date of the grant, if the stock target prices have not been met, then the unvested portion of the option will expire.
On August 21, 2015, certain senior managers were granted an aggregate of 23,750 stock options in connection with this program.
The stock options have an exercise price of $5.80 and if they vest will expire ten years from the date of grant. None of these
options vested as of December 31, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 117; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->37<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Stock-Based Compensation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company issues service, performance and
market-based stock options to employees and non-employees. The Company estimates the fair value of service and performance stock
option awards using the Black-Scholes option pricing model. The Company estimates the fair value of market-based stock option awards
using a Monte-Carlo simulation. Compensation expense for stock option awards is amortized on a straight-line basis over the awards&rsquo;
vesting period. Compensation expense includes the impact of an estimate for forfeitures for all stock options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The expected term of the stock options represents
the average period the stock options are expected to remain outstanding and is based on the expected term calculated using the
approach prescribed by&nbsp;the Securities&nbsp;and Exchange Commission's Staff Accounting Bulletin No.&nbsp;110 for &ldquo;plain
vanilla&rdquo; options. The expected stock price volatility for the Company&rsquo;s stock options was determined by using an average
of the historical volatilities of the Company and its industry peers. The Company will continue to analyze the stock price volatility
and expected term assumptions as more data for the Company&rsquo;s common stock and exercise patterns become available. The risk-free
interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company&rsquo;s
stock options. The expected dividend assumption is based on the Company&rsquo;s history and expectation of dividend payouts. The
Company estimates forfeitures based on historical experience and reduces compensation expense accordingly. The estimated forfeiture
rates used during the nine months ended December 31, 2016 ranged from 5.24% to 6.01%. The estimated forfeiture rates used during
the nine months ended December 31, 2015 ranged from 1.18% to 1.81%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company estimated the fair value of employee
and non-employee stock options using the Black-Scholes option pricing model. The fair value of employee stock options is being
amortized on a straight-line basis over the requisite service periods of the respective awards. The fair value of employee stock
options was estimated using the following weighted-average assumptions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 5.8pt 0 0; text-align: center"><B>Three&nbsp;Months</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 5.8pt 0 0; text-align: center"><B>Ended</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 5.8pt 0 0; text-align: center"><B>December 31,</B></P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 5.8pt 0 0; text-align: center"><B>Nine Months</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 5.8pt 0 0; text-align: center"><B>Ended</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 5.8pt 0 0; text-align: center"><B>December 31,</B></P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>Expected life</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">5.22 years</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">7.04 years</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">5.75 years</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">6.30 years</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 48%; text-align: left">Risk-free interest rate</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">1.86%</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">1.90%</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">1.83%</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">1.70%</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Dividend yield</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.00%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.00%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.00%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.00%</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Volatility</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">130%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">89%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">126%</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">89%</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>Fair value of options granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.18</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.75</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.08</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.40</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Share-based awards compensation expense is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Three&nbsp;Months</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Nine Months</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 48%; text-align: left">Cost of service revenue</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">63,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">72,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">197,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">189,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Research and development</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">77,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">107,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">201,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">268,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Selling, general and administrative</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">774,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">374,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,334,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,002,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total stock-based compensation</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">914,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">553,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,732,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,459,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B> &nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2016, there were unrecognized
compensation costs of $695,000 related to stock-based awards which are expected to be recognized over a weighted-average amortization
period of 1.36 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Stock-Based Award Activity</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Stock-based awards outstanding at December
31, 2016 under the various plans are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">Plan</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Awards Outstanding</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 83%">2006 Plan</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">171,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>2011 Plan</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">580,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt">2016 Plan</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">100,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">851,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">Awards available for grant as of December 31, 2016</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,265,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>


<!-- Field: Page; Sequence: 118; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->38<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Stock options award activity is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number of<BR> Shares</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted-<BR> Average<BR> Exercise Price</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted-<BR> Average<BR> Contractual Term</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Aggregate<BR> Intrinsic<BR> Value</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 48%">Outstanding at April 1, 2016</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">753,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">21.47</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Options granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">135,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.76</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Options exercised</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Options forfeited</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(16,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7.34</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Options expired</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(21,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">20.15</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Outstanding at December 31, 2016</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">851,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">18.63</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7.54</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">46,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">Exercisable at December 31, 2016</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">678,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">21.41</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7.27</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">33,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The aggregate intrinsic value of stock options is calculated as
the difference between the exercise price of the underlying stock options and the fair value of the Company&rsquo;s common stock,
or $5.04 per share at December 31, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Restricted stock award activity is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.05in 0 0; text-align: center"><B>Number of</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.05in 0 0; text-align: center"><B>Shares</B></P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.05in 0 0; text-align: center"><B>Weighted</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.05in 0 0; text-align: center"><B>Average Award</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.05in 0 0; text-align: center"><B>Date Fair Value</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.05in 0 0; text-align: center"><B>per Share</B></P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Unvested restricted stock awards outstanding at April 1, 2016</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; text-align: left">Restricted stock awards granted</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">31,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">4.81</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Restricted stock awards vested</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(31,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.81</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Restricted stock awards forfeited</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Unvested restricted stock awards outstanding at December 31, 2016</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Restricted stock awards were issued to non-employee
directors and certain executive officers in the nine months ended December 31, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">No income tax benefit has been recognized relating
to stock-based compensation expense and no tax benefits have been realized from exercised stock options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company did not capitalize any cost associated with stock-based
compensation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company issues new shares of common stock
upon exercise of stock based awards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Note 9.</B></FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Income Taxes</B></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s effective tax rate
was 123.28% and 41.31% for the three and nine months ended December 31, 2016, respectively. For the three and nine months ended
December 31, 2015, the effective tax rates were 0%. The change in the effective tax rates from continuing operations for the three
and nine months ended December 31, 2016 compared to the same period last year is primarily due to the intra-period allocation of
total tax expense between continuing operations and discontinued operations from the sale to Invekra.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for the tax effects
of discontinued operations as a discrete item and therefore recognizes the full tax effects of discontinued operations in the same
period that the pretax income or loss from discontinued operations is recognized. In accordance with the intra-period allocation
rules, as a result of having a full valuation allowance on deferred income taxes on the Company&rsquo;s entire operations, a tax
benefit is recorded in continuing operations for the benefit of the utilization of the deferred tax assets resulting from the income
from discontinued operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


<!-- Field: Page; Sequence: 119; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->39<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the three and nine months
ended December 31, 2016, the Company recorded income tax expense of $4,581,000 within discontinued operations.&nbsp;&nbsp;
This income tax expense was recognized in connection with the gain on sale of the IP and territory rights and the operations
through the sale date, associated with the Latin American operations. The Company was able to utilize certain net
operating loss carryovers (&ldquo;NOLs&rdquo;) of approximately $4,040,000 in order to reduce the amount of its income tax
obligations. The Company had previously established a full valuation allowance against the deferred income tax assets, which
included these NOLs. During the three and nine months ended December 31, 2016, the Company
recorded an income tax benefit of $4,040,000 within its continuing operations, representing the release of the valuation
allowance for the NOLs utilized to offset the gain and income reflected in discontinued operations. The
NOLs in certain jurisdictions did not fully offset the income tax obligations incurred. As a result, as of December 31,
2016, the Company recorded current income tax payable of $229,000 and deferred income tax liability of $312,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has completed a study to assess
whether or not a change in control for income tax purposes has occurred. The Company has determined, based on the results of the
study, that no such change in control has occurred for purposes of Internal Revenue Code section 382 and as a result, the Company&rsquo;s
income tax net operating loss carryforwards were not limited under such provision. The Company incurred losses for both financial
reporting and income tax purposes for the year ended March 31, 2016 and through September 30, 2016. The Company, after weighing
both positive and negative evidence, had fully reserved its deferred tax assets since it was more likely than not that such benefits
would not be realized in future periods. Except as disclosed below in connection with the utilization of net operating loss carryforwards
in connection with the gain on the sale to Invekra, as of December 31, 2016, the Company has fully reserved its deferred tax assets.
The Company will evaluate its deferred tax assets in future periods in order to determine whether any changes in circumstances
could affect the realization of their future benefit. If it is determined in future periods that portions of the Company&rsquo;s
deferred income tax assets satisfy the realization standards, the valuation allowance will be reduced accordingly.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As a result of certain realization requirements
of Accounting Standards Codification Topic 718, the Company&rsquo;s deferred tax assets and liabilities do not include certain
deferred tax assets at December 31, 2016 that arose directly from tax deductions related to equity compensation in excess of compensation
recognized for financial reporting purposes. Equity will be increased by approximately $533,000 if and when such deferred tax
assets are ultimately realized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Note 10.</B></FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Segment and Geographic Information</B></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company generates product revenues from
wound care products that are sold into the human and animal healthcare markets, and the Company generates service revenues from
laboratory testing services, which are provided to medical device manufacturers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company operates a single segment business
for product revenues, which consists of three geographical sales territories as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Three&nbsp;Months</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Nine&nbsp;Months</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; padding-bottom: 1pt"></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">Geographic region</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 48%; text-align: left">United States</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">1,671,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">1,010,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">4,741,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">2,983,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Latin America</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">465,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">465,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Europe and Rest of World</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,038,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,202,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,952,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,725,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,174,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,212,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,158,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,708,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Product license fees and royalties</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">44,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">231,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total product related revenues</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,174,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,256,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">8,158,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,939,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the three and nine months ended December
31, 2016, the Company reported $465,000 of Latin America product revenue related to the Supply Agreement with Invekra.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the Company&rsquo;s sale of its Latin American
business to Invekra, product revenues were reclassified from continuing operations to discontinued operations as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Three&nbsp;Months</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Nine&nbsp;Months</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 48%; text-align: left">Product revenues</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">359,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">1,260,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">2,693,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">4,085,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Product license fees and royalties</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">262,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">76,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">412,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">675,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total product related revenues</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">621,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,336,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,105,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,760,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

<!-- Field: Page; Sequence: 120; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->40<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table shows the Company&rsquo;s product license fees
and royalties revenues by partner:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Three&nbsp;Months</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Nine&nbsp;Months</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; padding-bottom: 1pt"></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">Partner</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 48%">Exeltis</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">44,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">202,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Innovacyn</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">29,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total product license fees and royalties</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">44,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">231,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&rsquo;s service revenues amounted
to $187,000 and $227,000 for the three months ended December 31, 2016 and 2015, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&rsquo;s service revenues amounted
to $638,000 and $855,000 for the nine months ended December 31, 2016 and 2015, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Note 11.</B></FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Significant Customer Concentrations</B></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the three months ended December 31, 2016,
one customer represented 22%, one customer represented 16%, one customer represented 13% and one customer represented 10% of net
revenue. For the three months ended December 31, 2015, one customer represented 33% and one customer represented 10% of net revenue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the nine months ended December 31, 2016,
one customer represented 27% of net revenue. For the nine months ended December 31, 2015, one customer represented 35% of net revenue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2016, one customer represented
30%, one customer represented 26%, one customer represented 23%, one customer represented 16% and one customer represented 13%
of the net accounts receivable balance. At March 31, 2016, one customer represented 33% of the net accounts receivable balance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Note 12.</B></FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Subsequent Events</B></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B><I>Amendment to
Code of Business Conduct</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">On January 17, 2017,
the Company&rsquo;s board of directors adopted changes to the Company&rsquo;s code of conduct. The code of conduct governs the
conduct of all the Company&rsquo;s employees, directors and officers, including management. The changes to the code of conduct
were made to update the code to current best practices. In addition to some clerical changes, the code of conduct now explicitly
requires employees, directors and officers to act honestly and ethically in dealing with customers, business partners and others.
Furthermore, the code of conduct now explicitly extends the confidentiality and conflicts of interest requirements to directors
and prohibits company loans. The code of conduct also updated the disclosure, reporting and enforcement provisions. No waivers
have been granted under the code of conduct to date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white">&nbsp;</P>


<!-- Field: Page; Sequence: 121; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font-size: 10pt"><TR STYLE="vertical-align: top; text-align: left"><TD STYLE="width: 33%">&nbsp;</TD><TD STYLE="width: 34%; text-align: center">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->41<!-- Field: /Sequence --></TD><TD STYLE="width: 33%; text-align: right">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><FONT STYLE="text-transform: uppercase"><B>Dealer
Prospectus Delivery Obligation</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><B>Until February
16, 2015, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the dealer&rsquo;s obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><B>1,250,000 Shares
of Common Stock and </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><B>Warrants to Purchase
1,078,125 Shares of Common Stock </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">&nbsp;<IMG SRC="logo.jpg" ALT=""></P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><B>SONOMA PHARMACEUTICALS,
INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">_______________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">PROSPECTUS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">_______________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">S<I>ole Book-Running Manager</I></P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Maxim Group LLC</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><I>Co-Manager</I></P>

<P STYLE="font: 16pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Dawson James Securities, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; border-bottom: Black 2pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>2
<FILENAME>logo.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 logo.jpg
M_]C_X  02D9)1@ ! 0   0 !  #_VP!#  8$!08%! 8&!08'!P8("A *"@D)
M"A0.#PP0%Q08&!<4%A8:'24?&ALC'!86("P@(R8G*2HI&1\M,"TH,"4H*2C_
MVP!# 0<'!PH("A,*"A,H&A8:*"@H*"@H*"@H*"@H*"@H*"@H*"@H*"@H*"@H
M*"@H*"@H*"@H*"@H*"@H*"@H*"@H*"C_P  1" !3 /T# 2(  A$! Q$!_\0
M'    @(# 0$               8%!P$#! ((_\0 0!   0,# 08"" ,&!00#
M     0(#!  %$08'$A,A,4%1810B,G&!D:&Q%2-2-D)SLL'1)#=R=((E,S7A
M0Z+Q_\0 &0$!  ,! 0                $" P0%_\0 ,Q$  @$"!0("!P@#
M          $" Q$$$B%!41,Q!2(44F%Q@9'P!A46,Z&QT>$CP?'_V@ , P$
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M,A.QD$XW]\+Q\,53<AAV,^ME]"FW4$I4E0Y@BNVSV:7=5J]'0$M(&5NK.ZA
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MD**W!GJ2 #]A5<\5HB[H5)/,WKKN_@+T9^5=9L2&Y,>CMIAI?6IH@+=4<=_
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MEXW<%([CF>E;W;S*5)FL/+0XI*P6T-<QN\5(YD=#@]#3=PF^7J)Y=.72LAM
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+@"BBB@"BBB@/_]D!

end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>3
<FILENAME>image_001.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 image_001.jpg
M_]C_X  02D9)1@ ! 0   0 !  #_VP!#  @&!@<&!0@'!P<)"0@*#!0-# L+
M#!D2$P\4'1H?'AT:'!P@)"XG("(L(QP<*#<I+# Q-#0T'R<Y/3@R/"XS-#+_
MVP!# 0D)"0P+#!@-#1@R(1PA,C(R,C(R,C(R,C(R,C(R,C(R,C(R,C(R,C(R
M,C(R,C(R,C(R,C(R,C(R,C(R,C(R,C+_P  1" $  'P# 2(  A$! Q$!_\0
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M]^G_ ,*</BIX*/\ S'8O^_3_ .%?+08#M3MP/2CG8U23ZGU*/BEX+_Z#T/\
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M"3VX+;HLYP2<]_ZUTT876NQY6.K*$URI\R5[II:?,]?EM]5U0J+I5AB7GG
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MHH *\G\8?\E<T?\ W$_]FKUBO*/& S\6M']=B?\ LU7#J85]H^J.WC(%7$&
M*J1#I46N-<Q>'K][//VE8&,>.H..U0E=V-Y2Y4WV*NNZKX<N8I-%U+4(0]SB
M+RD;+!B>.G0YQUKB]0^&6M6UL\-OJD4VGQDR!)790OOCD9^E87@6Q\.WM[+)
MKE\8;A)%>!6DV!SG));N<]J]IFU#1[BUDBGOK-X74JX,ZX(/7O73=TG:)YBC
M#&P<ZB2[6>MO,\OT'PHGB2<3W_B."\6%/]3%*S2;1V^;&T?05PL@P[@#@$@5
MT?BL:/IGB**3PQ<D!%W,T3DJCYZ*>_%<V222>Y-=]*]KWT/!Q7*GR):K=WO<
MV;]Y+"]L+AY);EEC#XG.5SZ#VZ5G6S$W&[ Y.<"KWB%G%XL#%<QC)P",DXYZ
M#K^-4+3_ %HK2/PG/5WLCZ!\*?\ (KV'_7/^IK9K'\*?\BO8?]<_ZFMBO%G\
M3/M:/\./HOR"BBBI- HHHH *\K\6+GXMZ/[1K_[-7JE>8>)@#\6])!_YY#^3
M5<.IC6V7JCLX_>GS7D-J%\S+,WW449)IT:_+6+KP>VF6ZDB>2Q>(Q3-']Z+G
M[WTJ8J[L:59.,;HQ-4\"Z%K%WYR"XTN:4Y! 5HW/TS@'\:I?\*?VG<VLH(QR
M3]GYQ^=:.G.+.U>>PD%WIQ<I+;.QR<?Q)GD_3\JTGU1-1MELK#4('R/-7[03
M\@7JKX[>]=2G4CLSR)4\-/6<=?)VN4M&\':!HY:Z_P!(OYU4[)7C^13CJ!_7
MFO)9HGBF>.12CJQ!##D5[$L#P,NJZSJ!18SE-A*)CT5>_P!3^5>9>)=3@UC7
M9;JVCV1,<+QUYZUTX=MMMZGFXU148I)+RZ^HGB0YO(#YXG/E ;P,?A6?9@>>
MN:U/$FTS6^T3_=;)F0+EL\D 5FV8_?+71'X3AJ?$?0'A?_D6;#_KE_6M>LGP
MQ_R+5A_UR_K6M7BS^)GVM'^''T7Y!1114F@4444 %>8^(^?B_I(_Z8#^3UZ=
M7F?B$ _&#2N/^7?/Z-5PZF%?:/JCMD'%5;V_:)VAC=$VIODE?[L:_3N:NHO%
M8^L:5>33?:K)8YBR>7-;2M@2+VP>QJ8I7U-*KDHWBC(6Y;4]T.GE8+9N9+R<
M#?+CLB_Y%76E?4-/2ZTXV:,'#2.(<D8XPXZGZTMMI6KWY2*2VCTNT!!DPXDE
MDQT /85JZCH,GV@ZAI4BV]Z.64_ZN;V8=C[UOS).QYZI5)1<K?I]W]:F'!;A
M]4F^UW,-_J BS&'R$ (_Y9CI^)_2O)+VQFT^]DM;E=LB-@UZ[<-?!_._X1N9
M;J$%@YD41*>Y!S7DFHZA/JE_+=W&/,D/0=J[,/U/&QVEE;J^_P"JW^\T/$Y7
M^TD1,;%B !$F\'\<UF6H_?+]:M-HLL4IBDN+1/EW!O-!!_*FFV%I>"(31S#
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17 I4B"]!4@&*8@%+110!_]D!

end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>4
<FILENAME>image_002.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 image_002.jpg
M_]C_X  02D9)1@ ! 0   0 !  #_VP!#  @&!@<&!0@'!P<)"0@*#!0-# L+
M#!D2$P\4'1H?'AT:'!P@)"XG("(L(QP<*#<I+# Q-#0T'R<Y/3@R/"XS-#+_
MVP!# 0D)"0P+#!@-#1@R(1PA,C(R,C(R,C(R,C(R,C(R,C(R,C(R,C(R,C(R
M,C(R,C(R,C(R,C(R,C(R,C(R,C(R,C+_P  1" $# '4# 2(  A$! Q$!_\0
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MBB_URPT+QMJ__$K74A,5+;E!,;@<@9!XKH/#/BZUU36[>SB\."T9\XFV@;<
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A10 4444 %%%% !1110 4444 %%%% !1110 4444 ?__9

end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>5
<FILENAME>image_003.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 image_003.jpg
M_]C_X  02D9)1@ ! 0   0 !  #_VP!#  @&!@<&!0@'!P<)"0@*#!0-# L+
M#!D2$P\4'1H?'AT:'!P@)"XG("(L(QP<*#<I+# Q-#0T'R<Y/3@R/"XS-#+_
MVP!# 0D)"0P+#!@-#1@R(1PA,C(R,C(R,C(R,C(R,C(R,C(R,C(R,C(R,C(R
M,C(R,C(R,C(R,C(R,C(R,C(R,C(R,C+_P  1" #4 %P# 2(  A$! Q$!_\0
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MDF<J*KC2)83^ZD91_=/(K13[A%N.QS46GW$9 EM2,=]N16K900QS++Y>V0#
M/3'X5K)!=)U /Z5,OG#K$#2;3*<[[H0>5<0M#,B21N-K(PR"/0UF0^"?"T4A
M=-$M2Q.>5+#\CQ6P'D'_ "QIQEN"/EC ^II7ML*X\1)'_JXE3@#( ' Z5GW5
MT@?RXSOEZ<=%J66WN[CAY"%/9>*EMM,2+&%YI!<+&$JH!K64?+4<4(45.!Q2
M$+32*** $VBDV#THHH 38OI1Y:^E%% !L7THV+Z444 ."+Z4NT444 .Q1110
#!__9

end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>6
<FILENAME>image_004.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 image_004.jpg
M_]C_X  02D9)1@ ! 0$ 8 !@  #_VP!#  H'!P@'!@H(" @+"@H+#A@0#@T-
M#AT5%A$8(Q\E)"(?(B$F*S<O)BDT*2$B,$$Q-#D[/CX^)2Y$24,\2#<]/CO_
MVP!# 0H+"PX-#AP0$!P[*"(H.SL[.SL[.SL[.SL[.SL[.SL[.SL[.SL[.SL[
M.SL[.SL[.SL[.SL[.SL[.SL[.SL[.SO_P  1" "+ +$# 2(  A$! Q$!_\0
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M <9Y /3BF,Z#/SKQUYZ5C2>'9VR@:VQESYQ0F1]V>&]0,\?0=*8= ERD+/\
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M22!TI4\9:I*0%2!,]PF?YFL4:3>$@&-5).!EAS5ZVT>1)2CRQJP /!R,'_\
M56D9UGU,I8;!16D4=KX6U*\OKL_:9BX"'@  5U=<CX3ACANV5)A(VPYV]*ZZ
MNE7MJ>%B5%5'RJR"BBBF<X55OB!$">@JU5&]D'F+&3C()'O0!EV^I65XH,%S
M&^1G&<?SJ?(.<<XZU5N]%TZ]'[^SC)]5^4_I5>'P_8VMW'<PB97C.1^]8@\$
M<@_6F!?-)TI^W-&VJ1#(YG6*!Y';:JC))["G:5,DT$K(20'QGUIQB\Q"I ((
MZ&F[WL[&9XHC,Z'/EKU--["CN2W%I:W/^OMH9?\ ?0&J+Z+IO:T1/]QBO\C3
MAX@TWS6AFN%MY5ZI)QC\:F@O;2]7=:W,4PZ_(P)'X4DVBFDRDVBV/_/.7_O_
M "?_ !5,_L6PSS$[>S3.?ZUHM3<<UHI2[F;BNQ5BTG3D8%;* D=V0$_K5F)5
M6[C15"CD8 P.E2(.:I6=]]KU*,102!%=E9V&,$9IR;:%&R91N/#.6++!"Q[&
M*9HS^1!%9LGABX4_+%>J!T"3QM_45VQJ-NM8.$'NCNCB\1':;_/\SB#X<G!R
M/[24XQ]Q#_)Z0>';G/+ZD>,?ZM1_[/7;TTBDJ5/L4\?B?YOP7^1Q8\,7$A!*
M7K ?WI(T_J:OVOA7:P)MD&.\UR6_10/YUTH%2)UK6-.FMHF$\9B):.;_ "#1
MM-%B2=R<C[L<>T?U)_.M>JMMUJU42W,XMM7;"BBBI*"JUY9K=)C)5ARK#J#5
MFB@#!DCU"V/,2SKZC@U"=09>)+2=?H :Z.D,:-U4'\* .<_M2,=+>X/_  $4
MHU!W.(K&9O\ >(%=!Y$7]P?E3A&@Z*!3N*QB11ZE<\;$MT/<<M5C8ED5@)/S
M<ACW-:E17-M'<QE)%R*+C2L9D]M;W)_?V\4O&,NH/'XU6M]*L+&5I;2SC@=Q
MAC&,9%69-.O8/^/>?>O99!FH6?4(_OV:M_NL133!CR*;CFF?:KGOI[_]]THF
MO7/R:>!_O/5<R(:)D7VJ"1_+U*V3/+-T_"ITM=2F/SND*^B#G\S5J/2HHTSD
MM)G.\\G-)R!1,R]FU.&Z8VT"2V_EY'][=GTS5-O$!5&,NF7:,N>-F>?2MV5&
MC/S<"F<XX)H13,O3M6@U-I%ACFC:, L)4V]<]/RJ_3RA)I-C>E,EB"GQCFA8
MV]*E1,'D_A5W(:(M/MIXIA)<3F5^0 .@'6M:H8HL?,14U92=V:15D%%%%24%
M%%% !1110 4444 %%%% !24M% "8'H*,"EHH **** $(!&",BHFM86S\F,_W
M3BIJ* *_V./LSC_@5'V1/[[_ /?56**=V! +2,')+-]6-2JBI]U0*=12 ***
(* "BBB@#_]D!

end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>7
<FILENAME>image_005.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 image_005.jpg
M_]C_X  02D9)1@ ! 0$ 8 !@  #_VP!#  H'!P@'!@H(" @+"@H+#A@0#@T-
M#AT5%A$8(Q\E)"(?(B$F*S<O)BDT*2$B,$$Q-#D[/CX^)2Y$24,\2#<]/CO_
MVP!# 0H+"PX-#AP0$!P[*"(H.SL[.SL[.SL[.SL[.SL[.SL[.SL[.SL[.SL[
M.SL[.SL[.SL[.SL[.SL[.SL[.SL[.SO_P  1" "3 , # 2(  A$! Q$!_\0
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MW-]:BVB>4B)L[1G'->?_ /".:P+SS&T^8+NSG%>9B%)ST1];EDZ4,.KM)_\
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*N'0DDXHHH0S_V0$!

end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
