2.Liquidity and Going Concern

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. Therefore, the condensed consolidated financial statements contemplate the realization of assets and liquidation of liabilities in the ordinary course of business. The Company has suffered recurring losses and negative cash flows from operations since inception, resulting in an accumulated deficit of $201.0 million at June 30, 2016. The Company has funded its operations through asset sales, credit facilities and other borrowings and equity sales.

At June 30, 2016, the Company had $0.9 million in cash, and based upon the Company’s current and anticipated usage of cash resources, the Company will require additional financing in the form of funding from outside sources during the third quarter of 2016. The Company will evaluate the amount of cash needed, and the manner in which such cash will be raised, on an ongoing basis. The Company’s continuation as a going concern is dependent upon its ability to obtain adequate additional financing, which the Company has successfully secured since inception, including financing from equity sales and asset divestitures. However, there is no assurance that the Company will be able to achieve projected levels of revenue and maintain access to sufficient working capital, and accordingly, there is substantial doubt as to whether the Company’s existing cash resources and working capital are sufficient to enable it to continue its operations for the next twelve months. If the Company is unable to obtain the necessary capital, it will be forced to license or liquidate its assets, significantly curtail or cease its operations and/or seek reorganization under the U.S. Bankruptcy Code.

The Company has a $7.5 million secured demand financing facility backed by its receivables and inventory with Faunus Group International, Inc. (“FGI”). At June 30, 2016, the Company had $3.0 million in borrowings outstanding under this facility with $4.5 million available. There is no guarantee that the Company will be able to borrow to the full limit of $7.5 million if FGI chooses not to finance a portion of its receivables or inventory or if the Company does not have available assets to provide the required collateral. FGI can cancel the facility at any time.

On May 19, 2015, the Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on November 17, 2015. The Form S-3 permits the Company to sell in one or more registered transactions up to an aggregate of $50.0 million of various securities not to exceed one-third of the Company’s public float in any 12-month period. At June 30, 2016, the Company had sold an aggregate of $3.1 million using the Form S-3 and remained eligible to sell pursuant to the 12-month limitation an aggregate of $2.0 million of securities.

During the six months ended June 30, 2016, the Company entered into the following agreements or made amendments to existing debt in order to address cash requirements and improve the Company’s capital structure:

April 1, 2016 Kanis Promissory Note: Kanis S.A agreed to lend the Company $2.0 million at 8% per annum

April 1, 2016 Kanis Amendment to Loan Agreement: We amended all prior conversion rights in the $7.5 million Kanis loan agreement to provide Kanis the right to convert the loan and accrued interest at $3.60 or market price. The amendment further allows the Company to mandatorily convert the loan and accrued interest upon a Liquidity Event at a discount of 25% below the Liquidity Event price.

April 11, 2016 Bell Director Note: Lon E. Bell, Ph.D. one of the Company’s directors, agreed to lend the Company $0.5 million at 8% per annum

June 30, 2016 Kanis Exchange Agreement: Kanis S.A agreed to an exchange of $7.5 million in principal plus accrued interest for shares of the Company’s common stock, conditional upon receipt of shareholder approval at a meeting scheduled for August 25, 2016

June 30, 2016 Bell Exchange Agreement: Dr. Bell agreed to an exchange of $0.5 million in principal plus accrued interest for shares of the Company’s common stock, conditional upon receipt of shareholder approval at a meeting scheduled for August 25, 2016

June 30, 2016 Haldor Topsøe Convertible Notes: The Company agreed to sell and issue (i) a Senior Convertible Promissory Note in the principal amount of $0.75 million and a Convertible Promissory Note in the principal amount of $0.5 million, each of which is convertible into the Company’s equity securities.