| Stockholders' Deficiency | 6. Stockholders’ Deficiency Preferred Stock The Company has
authorized a total of 5,000,000 shares of preferred stock, par value $0.001 per share. As of December 31, 2016 and 2015, 1,250,000
shares were designated as 9% Cumulative Convertible Preferred Stock (non-voting, “9% Preferred Stock”); 37,500 shares
were designated as Series B Convertible Preferred Stock (non-voting, “Series B Preferred Stock”); 205,000 shares were
designated as Series A Junior Participating Preferred Stock (non-voting, “Series A Junior Participating Preferred Stock”);
and 1,700 shares were designated as Series G 1.5% Convertible Preferred Stock. Accordingly, as of December 31, 2016, 3,505,800
shares of preferred stock were undesignated and may be issued with such rights and powers as the Board of Directors may designate. There were no shares
of 9% Preferred Stock or Series A Junior Participating Preferred Stock outstanding as of December 31, 2016 and 2015. Series B Preferred
Stock outstanding as of December 31, 2016 and 2015 consisted of 37,500 shares issued in a May 1991 private placement. Each share
of Series B Preferred Stock is convertible into approximately 0.00030 shares of common stock at an effective conversion price of
$2,208,375 per share of common stock, which is subject to adjustment under certain circumstances. As of December 31, 2016 and 2015,
the shares of Series B Preferred Stock outstanding are convertible into 11 shares of common stock. The Company may redeem the Series
B Preferred Stock for $25,001, equivalent to $0.6667 per share, an amount equal to its liquidation preference, at any time upon
30 days prior notice. Series G 1.5% Convertible Preferred
Stock On March 18, 2014,
the Company entered into Securities Purchase Agreements with various accredited investors (the “Initial Purchasers”),
pursuant to which the Company sold an aggregate of 753.22 shares of its Series G 1.5% Convertible Preferred Stock for a purchase
price of $1,000 per share, or an aggregate purchase price of $753,220. This financing represented the initial closing on the private
placement (the “Series G Private Placement”). The Initial Purchasers in this tranche of the Series G Private Placement
consisted of (i) Dr. Arnold S. Lippa, the Chairman of the Company’s Board of Directors and Chief Executive Officer at that
time, who invested $250,000 for 250 shares of Series G 1.5% Convertible Preferred Stock, and (ii) new, non-affiliated, accredited
investors. Neither the Series G 1.5% Convertible Preferred Stock nor the underlying shares of common stock had any registration
rights. The placement agents
and selected dealers in connection with the initial tranche of the Series G Private Placement received cash fees totaling $3,955
as compensation and an obligation of the Company to issue warrants to acquire 39,585 shares of common stock, totaling approximately
5.6365% of the shares of common stock into which the Series G 1.5% Convertible Preferred Stock may convert, issuable upon completion
of all closings of the Series G Private Placement and exercisable for five years, at a fixed price of $1.287, which is 120% of
the conversion price at which the Series G 1.5% Convertible Preferred Stock may convert into the Company’s common stock.
The warrants issuable to the placement agents and selected dealers in connection with the initial tranche of the Series G Private
Placement were valued pursuant to the Black-Scholes option-pricing model at $443,848. On April 17, 2014,
the Company entered into Securities Purchase Agreements with various accredited investors (together with the Initial Purchasers
as defined above, the “Purchasers”), pursuant to which the Company sold an aggregate of an additional 175.28 shares
of its Series G 1.5% Convertible Preferred Stock, for a purchase price of $1,000 per share, or an aggregate purchase price of $175,280.
This was the second and final closing on the Series G Private Placement, in which a total of 928.5 shares of Series G 1.5% Convertible
Preferred Stock were sold for an aggregate purchase price of $928,500. The Purchasers in the second and final tranche of the Series
G Private Placement consisted of new, non-affiliated, accredited investors and non-management investors who had also invested in
the first closing of the Series G Private Placement. One of the investors in this second and final closing of the Series G Private
Placement was an affiliate of an associated person of Aurora, a related party (see Note 8). Neither the Series G 1.5% Convertible
Preferred Stock nor the underlying shares of common stock had any registration rights. The placement agents
and selected dealers in connection with the second tranche of the Series G Private Placement received cash fees of $3,465 as compensation
and an obligation of the Company to issue warrants to acquire 19,650 shares of common stock, totaling approximately 12% of the
shares of common stock into which the Series G 1.5% Convertible Preferred Stock may convert, issuable upon completion of all closings
of the Series G Private Placement and exercisable for five years, at a fixed price of $1.287, which is 120% of the conversion price
at which the Series G 1.5% Convertible Preferred Stock may convert into the Company’s common stock. The warrants issuable
to the placement agents and selected dealers in connection with the second closing of the Series G Private Placement were valued
pursuant to the Black-Scholes option-pricing model at $220,321. The Series G 1.5%
Convertible Preferred Stock had a stated value of $1,000 per share and a stated dividend at the rate per share (as a percentage
of the Stated Value per share) of 1.5% per annum, compounded quarterly, payable quarterly within 15 calendar days of the end of
each fiscal quarter of the Company, in duly authorized, validly issued, fully paid and non-assessable shares of Series G 1.5% Convertible
Preferred Stock, which may include fractional shares of Series G 1.5% Convertible Preferred Stock. As the stated value of the Series
G 1.5% Convertible Preferred Stock was $1,000 per share, and the fixed conversion price was $1.0725, each share of Series G 1.5%
Convertible Preferred Stock was convertible into 932.4 shares of common stock. The aggregate of 928.5 shares of Series G 1.5% Convertible
Preferred Stock sold in all of the closings of the Series G Private Placement were initially convertible into a total of 865,734
shares of common stock. The Series G 1.5%
Convertible Preferred Stock became convertible, beginning 60 days after the last share of Series G 1.5% Convertible Preferred Stock
was issued in the Series G Private Placement, at the option of the holder, into common stock at the applicable conversion price,
at a rate determined by dividing the Stated Value of the shares of Series G 1.5% Convertible Preferred Stock to be converted by
the conversion price, subject to adjustments for stock dividends, splits, combinations and similar events as described in the form
of Certificate of Designation. In addition, the Company had the right to require the holders of the Series G 1.5% Convertible Preferred
Stock to convert such shares into common stock under certain enumerated circumstances as set forth in the Certificate of Designation. Upon either (i)
a Qualified Public Offering (as defined in the Certificate of Designation) or (ii) the affirmative vote of the holders of a majority
of the Stated Value of the Series G 1.5% Convertible Preferred Stock issued and outstanding, all outstanding shares of Series G
1.5% Convertible Preferred Stock, plus all accrued or declared, but unpaid, dividends thereon, were mandatorily convertible into
such number of shares of common stock determined by dividing the Stated Value of such Series G 1.5% Convertible Preferred Stock
(together with the amount of any accrued or declared, but unpaid, dividends thereon) by the Conversion Price (as defined in the
Certificate of Designation). Except as described
in the Certificate of Designation, holders of the Series G 1.5% Convertible Preferred Stock voted together with holders of the
Company common stock on all matters, on an as-converted to common stock basis, and not as a separate class or series (subject to
limited exceptions). In the event of
any liquidation or winding up of the Company prior to and in preference to any Junior Securities (including common stock), the
holders of the Series G 1.5% Convertible Preferred Stock were entitled to receive, in preference to the holders of the Company’s
common stock, a per share amount equal to the Stated Value, plus any accrued and unpaid dividends thereon. Purchasers in the
Series G Private Placement of the Series G 1.5% Convertible Preferred Stock executed written consents in favor of (i) approving
and adopting an amendment to the Company’s Second Restated Certificate of Incorporation that increased the number of authorized
shares of the Company to 1,405,000,000, of which 1,400,000,000 were shares of common stock and 5,000,000 were shares of preferred
stock, and (ii) approving and adopting the Cortex Pharmaceuticals, Inc. 2014 Equity, Equity-Linked and Equity Derivative Incentive
Plan. Subsequently, a Certificate of Amendment to the Company’s Second Restated Certificate of Incorporation, to effect the
decrease in the authorized shares to 70,000,000, of which 65,000,000 are shares of common stock and 5,000,000 are shares of preferred
stock, was filed with the Secretary of State of the State of Delaware on September 1, 2016. The shares of Series
G 1.5% Convertible Preferred Stock were offered and sold without registration under the Securities Act in reliance on the exemptions
provided by Section 4(a)(2) of the Securities Act as provided in Rule 506(b) of Regulation D promulgated thereunder. The shares
of Series G 1.5% Convertible Preferred Stock and the Company’s common stock issuable upon conversion of the shares of Series
G 1.5% Convertible Preferred Stock were not registered under the Securities Act or any other applicable securities laws, and unless
so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements
of the Securities Act. The Company recorded
dividends on the Series G 1.5% Convertible Preferred Stock of $1,165 and $6,867 for the years ended December 31, 2016 and 2015,
respectively, which was paid through the issuance of an additional 1.1 shares and 6.9 shares, respectively, of Series G 1.5% Convertible
Preferred Stock. The warrants that
the placement agents and selected dealers received in connection with all closings of the Series G Private Placement, which were
issued effective April 17, 2014, represent the right to acquire 59,235 shares of common stock exercisable for five years at a fixed
price of $1.287, which is 120% of the conversion price at which the Series G 1.5% Convertible Preferred Stock may convert into
the Company’s common stock. Aurora, a related
party (see Note 8), was one of the placement agents for this financing, and Aurora and its designees and/or affiliates received
fees in connection with this financing in the form of cash of $2,800 and warrants to purchase 32,083 shares of common stock during
the year ended December 31, 2014. Both Dr. Arnold S. Lippa and Jeff E. Margolis, officers and directors of the Company since March
22, 2013, have indirect ownership interests in Aurora through interests held in its members, and Jeff E. Margolis is also an officer
of Aurora. Effective August
25, 2015, a placement agent warrant issued on April 17, 2014 in conjunction with the Series G Private Placement of the Series G
1.5% Convertible Preferred Stock, representing the right to acquire a total of 7,424 shares of common stock, was exercised in part
(50%, or 3,712 shares) on a cashless basis, resulting in the net issuance of 3,345 shares of common stock. The gross exercise price
of the placement agent warrant that was exercised on a cashless basis was $4,778. During the three
months ended March 31, 2015, 25.323705 shares of Series G 1.5% Convertible Preferred Stock, including 0.323705 dividend shares,
were converted into 23,612 shares of common stock on a cashless basis. During the three months ended June 30, 2015, an aggregate
of 538.208190 shares of Series G 1.5% Convertible Preferred Stock, including 8.728190 dividend shares, were converted into 501,826
shares of common stock on a cashless basis. During the three months ended September 30, 2015, an aggregate of 57.506190 shares
of Series G 1.5% Convertible Preferred Stock, including 1.206190 dividend shares, were converted into 53,619 shares of common stock
on a cashless basis. There were no conversions of Series G 1.5% Convertible Preferred Stock into shares of common stock during
the three months ended December 31, 2015. Accordingly, during the year ended December 31, 2015, 621.038085 shares of Series G 1.5%
Convertible Preferred Stock, including 10.258085 dividend shares, were converted into 579,057 shares of common stock on a cashless
basis. As of December 31,
2015, the remaining outstanding shares of Series G 1.5% Convertible Preferred Stock were convertible into 241,088 shares of the
Company’s common stock, including 6,384 shares attributable to the 1.5% dividend on such shares of $6,847 accrued as of such
date. On April 17, 2016,
the remaining unconverted 259.7 shares of Series G 1.5% Convertible Preferred Stock outstanding (including accrued but unpaid dividends)
were automatically and mandatorily redeemed by conversion into 242,173 newly issued shares of common stock at a conversion price
of $1.0725 per share. Common Stock As discussed above,
the holders of the Series G 1.5% Convertible Preferred Stock approved and adopted an amendment to increase the number of authorized
shares of the Company to 1,405,000,000, of which 1,400,000,000 were shares of common stock and 5,000,000 were shares of preferred
stock. The Company also sought, and on April 17, 2014 obtained by written consent, sufficient votes of the holders of its common
stock, voting as a separate class, to effect this amendment. A Certificate of Amendment to the Company’s Certificate of Incorporation
to effect the increase in the authorized shares was filed with the Secretary of State of the State of Delaware on April 17, 2014. On August 16, 2016,
at a special meeting of the stockholders of the Company, the stockholders approved an amendment to the Company’s Second Restated
Certificate of Incorporation (i) to effect, at the discretion of the Company’s Board of Directors, a three hundred twenty
five-to-one (325-to-1) reverse stock split of all of the outstanding shares of the Company’s common stock, par value $0.001
per share, and (ii) to set the number of the Company’s authorized shares of stock at 70,000,000 shares, consisting of 65,000,000
shares designated as common stock, par value $0.001 per share, and 5,000,000 shares designated as preferred stock, par value $0.001
per share. On September 1, 2016, the Company filed a Certificate of Amendment to the Company’s Second Restated Certificate
of Incorporation with the Secretary of State of the State of Delaware to effect the approved amendment. Pursuant to the
amendment, an aggregate of 191.068 fractional shares resulting from the reverse stock split were not issued, but were to be paid
out in cash (without interest or deduction) in an amount equal to the number of shares exchanged into such fractional share multiplied
by the average closing trading price of the Company’s common stock on the OTCQB for the five trading days immediately before
the Certificate of Amendment effecting the reverse stock split was filed with the Delaware Secretary of State ($6.7899 per share,
on a post reverse stock split basis) for an aggregate of $1,298. On September 18,
2014, Dr. John Greer, Ph.D., was appointed to the position of Chairman of the Company’s Scientific Advisory Board. Dr. Greer
is Professor of Physiology and former Director of the Neuroscience and Mental Health Institute at the University of Alberta, holds
multiple grants regarding research into neuromuscular control of breathing, and is the inventor on the method of treatment patents
licensed by the Company with respect to ampakines. In connection with the appointment of Dr. Greer as Chairman of the Company’s
Scientific Advisory Board on September 18, 2014, the Board of Directors awarded 6,154 shares of common stock of the Company to
Dr. Greer (through his wholly-owned consulting company, Progress Scientific, Inc.), vesting 25% upon appointment, 25% on September
30, 2014, 25% on December 31, 2014, and 25% on March 31, 2015. The stock award was valued at $21.4500 per share, which was the
closing price of the Company’s common stock on September 18, 2014. This stock award was made under the Company’s 2014
Equity, Equity-Linked and Equity Derivative Incentive Plan. During the period September 18, 2014 through December 31, 2014, the
Company recorded a charge to operations of $99,000 with respect to this stock award. During the year ended December 31, 2015, the
Company recorded a final charge to operations of $33,000 with respect to this stock award. Effective October
15, 2014, Richard Purcell was appointed as the Company’s Senior Vice President of Research and Development. In conjunction
with his appointment, the Company agreed to issue to Mr. Purcell 6,154 shares of the Company’s common stock, with 25% of
such stock grant vesting and issuable every three months after the date of his appointment (i.e., on January 15, 2015, April 15,
2015, July 15, 2015 and October 15, 2015), subject to Mr. Purcell’s continued relationship with the Company on each of the
vesting dates. The stock grant was made under the Company’s 2014 Equity, Equity-Linked and Equity Derivative Incentive Plan.
Based on the Company’s closing stock price on October 15, 2014 of $25.3500 per share, during the year ended December 31,
2015, the Company recorded a charge to operations of $156,000, with respect to this stock award. 2015 Unit Offering On August 28, 2015,
the Company entered into a Second Amended and Restated Common Stock and Warrant Purchase Agreement (the “Purchase Agreement”)
with various accredited investors (each, a “Purchaser”, and together with purchasers in subsequent closings in the
private placement, the “Purchasers”), pursuant to which the Company sold units for aggregate cash consideration of
$721,180, with each unit consisting of (i) one share of the Company’s common stock, representing an aggregate of 105,517
shares of common stock, and (ii) one warrant to purchase two additional shares of common stock, representing an aggregate of 211,034
warrants. This financing represented the initial closing of a private placement of up to $3,000,000. On September 28, 2015, the
Company completed a second closing of the Purchase Agreement with various additional Purchasers, pursuant to which the Company
sold units for aggregate cash consideration of $218,530, with each unit consisting of (i) one share of the Company’s common
stock, representing an aggregate of 31,973 shares of common stock, and (ii) one warrant to purchase two additional shares of common
stock, representing an aggregate of 63,946 Warrants. On November 2, 2015, the Company completed a third closing of the Purchase
Agreement with various Purchasers, pursuant to which the Company sold units for aggregate cash consideration of $255,000, with
each unit consisting of (i) one share of the Company’s common stock, representing an aggregate of 37,309 shares of common
stock, and (ii) one warrant to purchase two additional shares of common stock, representing an aggregate of 74,618 warrants. This
third closing brought the aggregate amount raised under this private placement as of November 2, 2015 to $1,194,710. The unit price in
each closing of the private placement was $6.8348 (the “Per Unit Price”). The Warrants are exercisable through September
30, 2020 and may be exercised at a price of $6.8348 for each share of Common Stock to be acquired upon exercise. The Purchasers
consisted of non-affiliated investors, other than Dr. James S. Manuso, the current President and Chief Executive Officer of the
Company, who invested $250,000 in the initial closing of the private placement, and one other investor who invested $301,180 in
the private placement and became an affiliate of the Company by virtue of his aggregate stock holdings in the Company. The Warrants
do not contain any cashless exercise provisions or reset rights. No registration
rights were granted to any Purchaser in this private placement with respect to (i) the shares of common stock issued as part of
the units, (ii) the warrants, or (iii) the shares of common stock issuable upon exercise of the warrants. Placement agent
fees, brokerage commissions, and similar payments were made in the form of cash and warrants to qualified referral sources in connection
with certain sales of the shares of common stock and warrants, while other sales, including the sale to Dr. James S. Manuso, did
not result in any fees or commissions. Accordingly, the amount of such fees, on a percentage basis, varies in each closing. The
fees paid to such referral sources for the initial closing in cash totaled $47,118, or 6.5% of the aggregate amount paid for the
units sold. The fees paid in warrants for the initial closing to such referral sources (the warrants paid to qualified referral
sources are referred to herein as the “Placement Agent Warrants”) consist of warrants for 6,894 shares of common stock,
or that number of shares equal to 6.5% of the number of shares of common stock issued as part of the units, but not the shares
underlying the warrants. In connection with the second closing, fees paid to referral sources in cash totaled $18,603, or 8.5%
of the aggregate amount paid for the units sold, and 2,722 Placement Agent Warrants were issued, or warrants for that number of
shares equal to 8.5% of the number of shares of common stock issued as part of the units, but not the shares underlying the Warrants.
In connection with the third closing, fees paid to referral sources in cash totaled $25,500, or 10% of the aggregate amount paid
for the units sold, and 3,731 Placement Agent Warrants were issued, or warrants for that number of shares equal to 10% of the number
of shares of common stock issued as part of the units, but not the shares underlying the Warrants. Placement Agent Warrants are
exercisable until September 30, 2020 at the Per Unit Price. The Placement Agent Warrants have cashless exercise provisions. One
of the placement agents that received Placement Agent Warrants is Aurora. Both Arnold S. Lippa and Jeff E. Margolis, officers and
directors of the Company, have indirect ownership interests in Aurora through interests held in its members, and Jeff E. Margolis
is also an officer of Aurora. As a result, both Arnold S. Lippa and Jeff E. Margolis, or entities in which they have interests,
will receive a portion of the Placement Agent Warrants awarded in this private placement. In addition to the
above described placement agent fees, brokerage commissions, and similar payments that were made in the form of cash and warrants
to qualified referral sources, the Company also paid $10,164 in cash to other professionals for services related to the three closings. The shares of common
stock and warrants were offered and sold without registration under the Securities Act in reliance on the exemptions provided by
Section 4(a)(2) of the Securities Act as provided in Rule 506(b) of Regulation D promulgated thereunder. None of the shares of
common stock issued as part of the units, the warrants, the common stock issuable upon exercise of the warrants, the Placement
Agent Warrants or the shares of common stock issuable upon exercise of the Placement Agent Warrants were registered under the Securities
Act or any other applicable securities laws, and unless so registered, may not be offered or sold in the United States except pursuant
to an exemption from the registration requirements of the Securities Act. Unit Exchange
Agreement During April and
May 2016, the Company entered into Unit Exchange Agreements with certain warrant holders who had acquired units in connection with
the Second Amended and Restated Common Stock and Warrant Purchase Agreement on August 28, 2015, September 28, 2015 or November
2, 2015. The Unit Exchange Agreements provided for the warrant holders to exchange (i) existing warrants to purchase an aggregate
of 217,187 shares of the Company’s common stock, plus (ii) an aggregate of $529,394 in cash, in return for (i) an aggregate
of 108,594 shares of the Company’s common stock with a total market price of $728,859 (average $6.7275 per share), and (ii)
new warrants to purchase an aggregate of 108,594 shares of the Company’s common stock with an exercise price of $4.8750 per
share, exercisable for cash or on a cashless basis through the original expiration date of September 30, 2020. For accounting purposes,
for those unit warrant holders accepting the Company’s exchange offer, the Company evaluated the fair value of the incremental
consideration paid to induce the unit warrant holders to exchange their original warrants for exchanged warrants and determined
that the Company did not incur any cost with respect to the exchange transactions. Information with respect to the Black-Scholes
variables used in connection with the evaluation of the fair value of the exchange consideration is provided at Note 2. 1st 2016 Unit
Offering On January 8, 2016,
the Company initiated a new equity private placement, consisting of units of common stock and warrants, up to an aggregate of $2,500,000,
with each unit consisting of (i) one share of common stock, and (ii) one warrant to purchase two additional shares of common stock.
During the nine months ended September 30, 2016, the Company entered into purchase agreements with nine accredited and four non-accredited,
non-affiliated investors, pursuant to which an aggregate of 43,003 shares of common stock and an aggregate of 86,006 warrants were
sold, generating gross proceeds of $309,985. Included in the
gross proceeds of $309,985 received was $25,350 received on June 30, 2016 from the sale of 3,517 shares of common stock and an
aggregate of 7,034 warrants to an unrelated entity with which the Company simultaneously entered into one-year agreement for investor
relations services. The unit price in
the private placement closings was $7.2085. The warrants are exercisable at $7.9300, for each share of common stock to be acquired,
and expire on February 28, 2021. The warrants have cashless exercise provisions and contain certain “blocker” provisions
limiting the percentage of shares of the Company’s common stock that the purchaser can beneficially own upon conversion to
not more than 4.99% of the issued and outstanding shares immediately after giving effect to the warrant exercise. In the case of an
acquisition in which the Company is not the surviving entity, the holder of the warrant would receive from any surviving entity
or successor to the Company, in exchange for the warrant, a new warrant from the surviving entity or successor to the Company,
substantially in the form of the existing warrant and with an exercise price adjusted to reflect the nearest equivalent exercise
price of common stock (or other applicable equity interest) of the surviving entity that would reflect the economic value of the
warrant, but in the surviving entity. No registration
rights were granted to the purchasers in the private placement with respect to (i) the shares of common stock issued as part of
the units, (ii) the warrants, or (iii) the shares of common stock issuable upon exercise of the warrants. No placement agent
fees, brokerage commissions, finder’s fees or similar payments were made in the form of cash or warrants to qualified referral
sources in connection with the sale of the shares of common stock and warrants. The Company paid $3,429 in cash to other professionals
for services related to the seven closings. 2nd 2016 Unit
Offering On December 29,
2016, the Company entered into purchase agreements with certain accredited investors, pursuant to which, the Company sold units
in a private placement for aggregate cash consideration of $125,000, with each unit consisting of (i) one share of common stock,
and (ii) one warrant to purchase an additional share of common stock. On December 30, 2016, the Company sold additional units to
additional investors for aggregate cash consideration of $60,000 in a second and final closing, bringing the total aggregate consideration
paid in the private placement to $185,000 through December 31, 2016. On December 31, 2016, the private placement terminated pursuant
to its terms. The price per unit in the initial closing of the private placement was $1.42. The warrants are exercisable until
December 31, 2021 and may be exercised at 110% of the per unit price, or $1.562 per share of common stock. The warrants have a
cashless exercise provision and certain “blocker” provisions limiting the percentage of shares of common stock of the
Company that the purchaser can hold upon exercise. The warrants are also subject to a call by the Company at $0.001 per share upon
ten (10) days written notice if the Company’s common stock closes at 200% or more of the unit purchase price for any five
(5) consecutive trading days. The purchasers were non-affiliated investors. In total, 130,284 shares of common stock were purchased
in the private placement, together with warrants to purchase an additional 130,284 shares of Common Stock. In addition,
as set forth in the purchase agreements, each purchaser has the option, but not the obligation, to exchange the entire amount
invested in the private placement (but not less than the entire amount), in such purchaser’s sole discretion, into any
subsequent offering of the Company until the earlier of (i) the completion of subsequent offerings by the Company aggregating
at least $15 million of gross proceeds to the Company, or (ii) December 31, 2017. If exchanged, the amount to be invested in
a subsequent offering will be 1.2 times the amount of the initial investment in the private placement, or 1.4 times the
amount of the initial investment if the Company has entered into financing transactions pursuant to Sections 3(a)(9) or
3(a)(10) of the Securities Act of 1933, as amended, or other financing arrangements that have full-ratchet anti-dilution
provisions (i) without a floor, or (ii) with an indeterminate and potentially infinite number of shares issuable pursuant to
such provisions. If neither termination condition has been reached, and the Company has more than one subsequent offering,
the purchaser may elect to exchange into any subsequent offering, regardless of whether such purchaser has already exchanged
into a subsequent offering; provided, however, that the amount invested in such subsequent offering will only and always be
1.2 (or 1.4, as applicable) times the amount of the initial investment. In the case of an
acquisition, as defined in the agreement, in which the Company is not the surviving entity, the holder of each warrant would receive
from any surviving entity or successor to the Company, in exchange for such warrant, a new warrant from the surviving entity or
successor to the Company, substantially in the form of the existing warrant and with an exercise price adjusted to reflect the
nearest equivalent exercise price of common stock (or other applicable equity interest) of the surviving entity that would reflect
the economic value of the warrant, but in the surviving entity. Unlimited piggy-back
registration rights have been granted with respect to the common stock, and the common stock underlying the warrants, unless such
common stock is eligible to be sold without volume limits under an exemption from registration under any rule or regulation of
the SEC that permits the holder to sell securities of the Company to the public without registration. The Company is obligated
to pay placement agent fees, brokerage commissions, finder’s fees or similar payments totaling up to $13,875 to an unaffiliated
qualified referral source as well as warrants up to 7.5% of number of units sold in the private placement. The Company paid $4,000
in cash to other professionals for services related to the closings. The shares of common
stock and warrants were offered and sold without registration under the Securities Act in reliance on the exemptions provided by
Section 4(a)(2) of the Securities Act as provided in Rule 506(b) of Regulation D promulgated thereunder. None of the shares of
common stock issued |
