<SEC-DOCUMENT>0001193125-14-237348.txt : 20140624
<SEC-HEADER>0001193125-14-237348.hdr.sgml : 20140624
<ACCEPTANCE-DATETIME>20140616122742
ACCESSION NUMBER:		0001193125-14-237348
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20140331
FILED AS OF DATE:		20140616
DATE AS OF CHANGE:		20140616

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SCYNEXIS INC
		CENTRAL INDEX KEY:			0001178253
		STANDARD INDUSTRIAL CLASSIFICATION:	PHARMACEUTICAL PREPARATIONS [2834]
		IRS NUMBER:				000000000
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-36365
		FILM NUMBER:		14922207

	BUSINESS ADDRESS:	
		STREET 1:		3501-C TRICENTER BLVD
		CITY:			DURHAM
		STATE:			NC
		ZIP:			27713
		BUSINESS PHONE:		919-544-8600

	MAIL ADDRESS:	
		STREET 1:		3501-C TRICENTER BLVD
		CITY:			DURHAM
		STATE:			NC
		ZIP:			27713
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d722469d10q.htm
<DESCRIPTION>10-Q
<TEXT>
<HTML><HEAD>
<TITLE>10-Q</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="line-height:1.0pt;margin-top:0pt;margin-bottom:0pt;border-bottom:1px solid #000000">&nbsp;</P>
<P STYLE="line-height:3.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1px solid #000000">&nbsp;</P> <P STYLE="margin-top:4pt; margin-bottom:0pt; font-size:18pt; font-family:Times New Roman" ALIGN="center"><B>UNITED STATES </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:18pt; font-family:Times New Roman" ALIGN="center"><B>SECURITIES AND EXCHANGE COMMISSION </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:12pt; font-family:Times New Roman" ALIGN="center"><B>WASHINGTON, D.C. 20549 </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><center>
<P STYLE="line-height:6.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1.00pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:18pt; font-family:Times New Roman" ALIGN="center"><B>FORM&nbsp;10-Q </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><center>
<P STYLE="line-height:6.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1.00pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>(Mark One) </B></P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:12pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B></B><FONT STYLE="FONT-FAMILY:WINGDINGS">&#120;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><B>QUARTERLY REPORT PURSUANT TO SECTION&nbsp;13 OR 15(d)&nbsp;OF THE SECURITIES EXCHANGE ACT OF 1934 </B></TD></TR></TABLE>
 <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2014 </B></P>
 <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>OR </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:12pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B></B><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)&nbsp;OF THE SECURITIES EXCHANGE ACT OF 1934 </B></TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>FOR THE TRANSITION PERIOD FROM
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> TO
<U></U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Commission File Number 001-36365 </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><center>
<P STYLE="line-height:6.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1.00pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:24pt; font-family:Times New Roman" ALIGN="center"><B>SCYNEXIS,&nbsp;Inc. </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>(Exact name of registrant as specified in its charter) </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><center>
<P STYLE="line-height:6.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1.00pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" ALIGN="center">


<TR>
<TD WIDTH="49%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="47%"></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" ALIGN="center"><B>Delaware</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top" ALIGN="center"><B>56-2181648</B></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>(State or other jurisdiction of</B></P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>incorporation or organization)</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>(I.R.S. Employer</B></P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Identification No.)</B></P></TD></TR>
</TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
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<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="47%"></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>3501 C Tricenter Boulevard</B></P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Durham, North Carolina</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center"><B>27713</B></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="top" ALIGN="center"><B>(Address of principal executive offices)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top" ALIGN="center"><B>(Zip Code)</B></TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>(919) 544-8600 </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>(Registrant&#146;s telephone number, including area code) </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><center> <P STYLE="line-height:6.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1.00pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed by Section&nbsp;13 or 15(d)&nbsp;of the
Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been subject to such filing requirements for the past
90&nbsp;days.&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;&nbsp;<FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;<FONT STYLE="FONT-FAMILY:WINGDINGS">&#120;</FONT> </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule&nbsp;405 of <FONT STYLE="white-space:nowrap">Regulation&nbsp;S-T</FONT> (&#167;232.405 of this chapter) during the preceding 12&nbsp;months (or for such shorter period that the
registrant was required to submit and post such files).&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;&nbsp;<FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;<FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT> </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of &#147;large accelerated filer,&#148; &#147;accelerated filer&#148; and &#147;smaller reporting company&#148; in Rule&nbsp;12b-2 of the Exchange Act. </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="19%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="52%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="24%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="2%"></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">Large&nbsp;accelerated&nbsp;filer</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Accelerated&nbsp;filer</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">Non-accelerated filer</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#120;</FONT>&nbsp;&nbsp;(Do not check if a smaller reporting company)</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Smaller&nbsp;reporting&nbsp;company</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of the
Exchange Act).&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;&nbsp;<FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;<FONT STYLE="FONT-FAMILY:WINGDINGS">&#120;</FONT> </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As of June&nbsp;1, 2014, there were 8,502,055 shares of the registrant&#146;s Common Stock outstanding. </P>
<P STYLE="font-size:10pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P> <P STYLE="line-height:1.0pt;margin-top:0pt;margin-bottom:0pt;border-bottom:1px solid #000000">&nbsp;</P>
<P STYLE="line-height:3.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1px solid #000000">&nbsp;</P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>SCYNEXIS,&nbsp;INC. </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>QUARTERLY REPORT ON FORM&nbsp;10-Q </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2014 </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc"></A>TABLE OF CONTENTS </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="8%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="86%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Page</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><A HREF="#toc722469_1a">PART&nbsp;I FINANCIAL INFORMATION </A></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>1</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Item&nbsp;1.</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"><A HREF="#toc722469_1">Financial Statements</A></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"><A HREF="#toc722469_2">Unaudited Condensed Balance Sheets as of March 31, 2014 and December&nbsp;31, 2013</A></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc722469_3">Unaudited Condensed Statements of Operations for the three months ended March 31, 2014 and 2013</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc722469_4">Unaudited Condensed Statements of Cash Flows for the three months ended March 31, 2014 and 2013</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"><A HREF="#toc722469_5">Notes to Financial Statements (unaudited)</A></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">4</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Item 2.</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"><A HREF="#toc722469_6">Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">23</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Item 3.</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"><A HREF="#toc722469_7">Quantitative and Qualitative Disclosures About Market Risk</A></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">31</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Item 4.</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"><A HREF="#toc722469_8">Controls and Procedures</A></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">31</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><A HREF="#toc722469_8a">PART&nbsp;II&nbsp;OTHER INFORMATION </A></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">32</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Item&nbsp;1A.</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"><A HREF="#toc722469_9">Risk Factors</A></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">32</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Item 2.</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"><A HREF="#toc722469_10">Unregistered Sales of Equity Securities and Use of Proceeds</A></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">60</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Item 6.</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"><A HREF="#toc722469_11">Exhibits</A></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">60</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><A HREF="#toc722469_12">Signatures</A></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
</TABLE>

<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc722469_1a"></A>PART&nbsp;I. FINANCIAL INFORMATION </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%" VALIGN="top" ALIGN="left"><B><A NAME="toc722469_1"></A>Item&nbsp;1.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Financial Statements </B></TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc722469_2"></A>SCYNEXIS, INC. </B></P>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>UNAUDITED CONDENSED BALANCE SHEETS </B></P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>(in thousands, except share and per share data) </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:9pt" ALIGN="center">


<TR>
<TD WIDTH="74%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>March&nbsp;31,&nbsp;2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>December&nbsp;31,&nbsp;2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman"><B>Assets</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Current assets:</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Cash and cash equivalents</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">650</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,402</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Accounts receivable, net of allowance for bad debts</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">900</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">719</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Unbilled services</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">437</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">343</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Prepaid expenses and other current assets</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">305</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">489</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Total current assets</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,292</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,953</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Property and equipment, net of accumulated depreciation</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,321</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,401</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Deferred financing costs</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,608</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,144</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Other assets</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">112</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">114</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Deferred offering costs</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,645</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,775</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman"><B>Total assets</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>$</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>12,978</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>$</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>12,387</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman"><B>Liabilities, convertible preferred stock, and stockholders&#146; deficit</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Current liabilities:</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Accounts payable</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">2,660</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,932</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Accrued expenses</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,602</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,058</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Deferred revenue, current portion</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,251</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">487</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Current portion of long-term debt</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Total current liabilities</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">20,513</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">18,477</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Deferred revenue, net of current portion</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,426</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,144</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Derivative liability</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,998</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">12,237</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Deferred rent</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,466</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,481</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Total liabilities</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">33,403</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">33,339</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Commitments and contingencies (Note 5)</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Series A convertible preferred stock, $0.001 par value, authorized 31,410 shares; 31,407 shares issued and outstanding as of
March&nbsp;31, 2014 and December&nbsp;31, 2013</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">250</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">250</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Series B convertible preferred stock, $0.001 par value, authorized 711,987 shares; 467,814 shares issued and outstanding as of
March&nbsp;31, 2014 and December&nbsp;31, 2013</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,215</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,215</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Series C convertible preferred stock, $0.001 par value, authorized 2,967,678 shares; 2,770,633 shares issued and outstanding as of
March&nbsp;31, 2014 and December&nbsp;31, 2013</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">28,121</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">28,121</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Series C-2 convertible preferred stock, $0.001 par value, authorized 2,347,826 shares; 2,347,826 shares issued and outstanding as of
March&nbsp;31, 2014 and December&nbsp;31, 2013</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">13,500</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">13,500</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Series D-1 convertible preferred stock, $0.001 par value, authorized 10,000,000 shares; 6,054,255 shares issued and outstanding as of
March&nbsp;31, 2014 and December&nbsp;31, 2013</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">16,952</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">16,952</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Series D-2 convertible preferred stock, $0.001 par value, authorized 10,000,000 shares; 6,131,338 and 5,742,697 shares issued and
outstanding as of March&nbsp;31, 2014 and December&nbsp;31, 2013</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">25,752</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">24,119</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Stockholders&#146; deficit:</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Common stock, $0.001 par value, authorized 70,000,000 shares; 334,484 and 334,068 shares issued and outstanding as of March&nbsp;31,
2014 and December&nbsp;31, 2013</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Additional paid-in capital</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,650</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,168</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Accumulated deficit</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(112,865</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(113,277</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Total stockholders&#146; deficit</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(109,215</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(108,109</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman"><B>Total liabilities, convertible preferred stock, and stockholders&#146; deficit</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>$</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>12,978</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>$</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>12,387</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>
 <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><I>The accompanying notes are an integral part of the financial statements. </I></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">1 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc722469_3"></A>SCYNEXIS, INC. </B></P>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>UNAUDITED CONDENSED STATEMENTS OF OPERATIONS </B></P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>(in thousands, except share and per share data) </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="74%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Three&nbsp;months&nbsp;ended&nbsp;March&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2014&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2013&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Revenue &#151; related party</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,822</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,822</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Revenue</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,883</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,973</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total revenue</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,705</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,795</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cost of revenue</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,960</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,148</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Gross profit</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">745</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">647</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Operating expenses:</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research and development</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,320</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,154</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Selling, general and administrative</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,206</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,091</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Gain on sale of asset</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(514</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total operating expenses</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,526</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,731</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Loss from operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,781</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,084</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other income (expense):</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Amortization of deferred financing costs and debt discount</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(536</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(709</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Interest expense &#151; related party</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(226</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Interest expense</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(44</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(50</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Derivative fair value adjustment</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,783</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other expense</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(10</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total other income (expense):</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,193</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(985</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Net income (loss)</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>412</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;</B></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><B>(2,069</B></TD>
<TD NOWRAP VALIGN="bottom"><B>)&nbsp;</B></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deemed dividend for beneficial conversion feature on Series D-2 preferred stock</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(909</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deemed dividend for antidilution adjustments to convertible preferred stock</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(214</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accretion of convertible preferred stock</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(510</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net loss attributable to common stockholders</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(1,221</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(2,069</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Per share information:</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net loss per common share, basic</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(3.65</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(6.16</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net loss per common share, diluted</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(6.57</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(6.16</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>
 <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><I>The accompanying notes are an integral part of the financial statements. </I></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">2 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc722469_4"></A>SCYNEXIS, INC. </B></P>
 <P STYLE="margin-top:4pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS </B></P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>(in thousands) </B></P> <P STYLE="font-size:10pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="85%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Three&nbsp;months&nbsp;ended<BR>March&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Cash flows from operating activities:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net income (loss)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">412</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(2,069</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Adjustments to reconcile net loss to net cash used in operating activities:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Gain on sale of asset, net of transaction expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(514</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Depreciation</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">308</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">347</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Stock-based compensation expense</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">110</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">42</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Amortization of deferred financing costs and debt discount</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">536</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">709</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Change in fair value of derivative liability</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(2,783</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Changes in deferred rent</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(15</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(8</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Changes in operating assets and liabilities:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accounts receivable and unbilled services</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(275</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(233</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Prepaid expenses, other assets, and deferred costs</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">186</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(106</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accounts payable and accrued expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">635</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(239</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Interest payable &#151; related party</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">226</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred revenue</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,047</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(6</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net cash provided by (used in) operating activities</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">161</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,851</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Cash flows from investing activities:</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Proceeds from sale of asset, net of transaction expenses</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">514</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Purchases of property and equipment</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(74</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(266</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net cash (used in) provided by investing activities</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(74</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">248</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Cash flows from financing activities:</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Proceeds from sale of preferred stock</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">544</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Payments of deferred offering costs</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,388</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Proceeds from exercise of stock options</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">5</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net cash used in financing activities</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(839</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Decrease in cash and cash equivalents</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(752</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,603</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cash and cash equivalents, beginning of period</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,402</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,385</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cash and cash equivalents, end of period</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">650</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">782</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Supplemental cash flow information:</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cash paid for interest</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">45</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">50</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Noncash financing and investing activities:</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Beneficial conversion feature on sale of Series D-2 preferred stock</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">909</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Beneficial conversion feature for antidilution adjustment</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">214</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Adjustment of preferred stock to redemption value</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">510</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deemed contribution of a loan guarantee</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,930</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Issuance of warrants with preferred stock</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">544</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred offering costs included in accounts payable and accrued expenses</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,715</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Equipment purchase in accounts payable and accrued expenses</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">204</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">45</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><I>The accompanying notes are an integral part of the financial statements. </I></P>

 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">3 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc722469_5"></A>SCYNEXIS, INC. </B></P>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>NOTES TO THE FINANCIAL STATEMENTS </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>FOR THE THREE MONTHS ENDED MARCH 31, 2014 </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>(unaudited) </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>(in
thousands, except percentage, share and per share data) </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

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<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>1.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Description of Business and Basis of Preparation </B></TD></TR></TABLE>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Organization </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">SCYNEXIS, Inc. (&#147;SCYNEXIS&#148; or the &#147;Company&#148;) is a Delaware corporation formed on November 4, 1999. SCYNEXIS is a
pharmaceutical company, headquartered in Research Triangle Park, North Carolina, committed to the discovery, development and commercialization of novel anti-infectives to address significant unmet therapeutic needs. The Company also offers its
services and partnerships in the drug discovery and development phases, primarily in the form of integrated research teams consisting of medicinal, computational, analytical, and process scientists working on a collaborative basis with its customers
on research projects. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Reverse stock-split </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On March&nbsp;17, 2014, the Company amended its amended and restated certificate of incorporation to implement a 1-for-4 reverse stock split of
its common stock. The reverse stock split did not cause an adjustment to the par value or the authorized shares of the common stock. As a result of the reverse stock split, the Company adjusted the share amounts under its employee incentive plans,
outstanding options and common stock warrant agreements with third parties. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On April&nbsp;25, 2014, the Company amended its amended and
restated certificate of incorporation to implement an additional 1-for-5.1 reverse stock split of its common stock. The reverse stock split did not cause an adjustment to the par value or the authorized shares of the common stock. As a result of the
reverse stock split, the Company further adjusted the share amounts under its employee incentive plans, outstanding options and common stock warrant agreements with third parties. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">All disclosures of common shares and per common share data in the accompanying interim financial statements and related notes reflect these
two reverse stock splits for all periods presented. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Initial public offering </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On May&nbsp;7, 2014, the Company completed an initial public offering (IPO) of its common stock. The Company sold an aggregate of 6,200,000
shares of common stock under the Registration Statement on Form S-1 at a public offering price of $10 per share. Net proceeds were approximately $54.8 million, after deducting underwriting discounts and commissions of $3.3 million and offering
expenses of $3.9 million. Upon the completion of the IPO, all outstanding shares of the Company&#146;s convertible preferred stock were converted into 1,691,884 shares of common stock and certain outstanding warrants were exercised for an additional
275,687 shares of common stock. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>2.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Summary of Significant Accounting Policies </B></TD></TR></TABLE>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Unaudited Interim Financial Information </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The accompanying unaudited financial statements and notes have been prepared in accordance with accounting principles generally accepted in the
United States, or US&nbsp;GAAP, as contained in the Financial Accounting Standards Board (&#147;FASB&#148;) Accounting Standards Codification (the &#147;Codification&#148; or &#147;ASC&#148;) for interim financial information. In the opinion of
management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, and cash flows. The results of operations for the three months
ended March&nbsp;31, 2014 are not necessarily </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">4 </P>


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indicative of the results for the full year or the results for any future periods. These financial statements should be read in conjunction with the financial statements and notes set forth in
the Company&#146;s Registration Statement on Form S-1 under the Securities Act of 1933, as amended, filed with the Securities and Exchange Commission on April&nbsp;30, 2014. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Use of Estimates </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates
include: the accounts receivable allowance; valuation of the related-party deemed contribution; the fair value of the Company&#146;s common stock used to measure stock-based compensation for options granted to employees and nonemployees and
determine the fair value of common stock warrants; the fair value of convertible preferred stock; the fair value of the Company&#146;s derivative liability; and the estimated useful lives of property and equipment. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Concentration of Credit Risk </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash on deposit with a bank,
which exceeds insured limits, and accounts receivable and unbilled services. The Company performs ongoing credit evaluations of customer&#146;s financial condition and does not require collateral. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Cash and Cash Equivalents </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company considers any highly liquid investments with a remaining maturity of three months or less when purchased to be cash and cash
equivalents. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Accounts Receivable and Unbilled Services </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Accounts receivable and unbilled services consist of amounts billed and unbilled under the Company&#146;s service contracts with its customers.
The Company extends credit to customers without requiring collateral. Accounts receivable are stated at net realizable value. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance based on its history of
collections and write-offs and the current status of all receivables. The Company does not accrue interest on trade receivables. The allowance for bad debts was $163 as of March&nbsp;31, 2014 and December&nbsp;31, 2013. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Deferred Financing Costs </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Deferred financing costs are transaction costs associated with issuing debt as well as costs related to a deemed contribution for a guarantee
from a related party. The Company recognizes these costs in the balance sheet as noncurrent assets. Deferred financing costs are amortized over the life of the related debt. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Deferred Offering Costs </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Deferred offering costs are expenses related to the IPO. These costs consist of legal, accounting, printing, and filing fees that the Company
capitalized, including fees incurred by the independent registered public accounting firm directly related to the offering. The deferred offering costs will be offset against IPO proceeds. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Revenue Recognition and Deferred Revenue </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company derives the majority of its revenue from providing contract research and development services under fee for service arrangements.
The Company also has entered into collaboration arrangements in </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">5 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
exchange for non-refundable upfront payments and consideration as services are performed. These arrangements include multiple elements, such as the sale of licenses and the provision of services.
Under these arrangements, the Company also is entitled to receive development milestone payments and royalties in the form of a designated percentage of product sales. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Revenue is recognized when all of the following conditions are met: (i)&nbsp;persuasive evidence of an arrangement exists, (ii)&nbsp;delivery
has occurred or services have been rendered, (iii)&nbsp;fees are fixed or determinable, and (iv)&nbsp;collection of fees is reasonably assured. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">When entering into an arrangement, the Company first determines whether the arrangement includes multiple deliverables and is subject to
accounting guidance in ASC subtopic 605-25, <I>Multiple-Element Arrangements</I>. If the Company determines that an arrangement includes multiple elements, it determines whether the arrangement should be divided into separate units of accounting and
how the arrangement consideration should be measured and allocated among the separate units of accounting. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">An element qualifies as a
separate unit of accounting when the delivered element has standalone value to the customer. The Company&#146;s arrangements do not include a general right of return relative to delivered elements. Any delivered elements that do not qualify as
separate units of accounting are combined with other undelivered elements within the arrangement as a single unit of accounting. If the arrangement constitutes a single combined unit of accounting, the Company determines the revenue recognition
method for the combined unit of accounting and recognizes the revenue over the period from inception through the date the last deliverable within the single unit of accounting is delivered. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company&#146;s contract research and development services revenue is recognized in the period in which the services are performed. The
Company historically has recognized milestone payments received on a straight-line basis over the remaining service period. No milestone payments were received in either period presented in the accompanying statements of operations. In arrangements
that include license rights and other non-contingent deliverables, such as participation in a steering committee, these deliverables do not have standalone value because the non-contingent deliverables are dependent on the license rights. That is,
the non-contingent deliverables would not have value without the license rights, and only the Company can perform the related services. Upfront license rights and non-contingent deliverables, such as participation in a steering committee, do not
have standalone value as they are not sold separately and they cannot be resold. In addition, when non-contingent deliverables are sold with upfront license rights, the license rights do not represent the culmination of a separate earnings process.
As such, the Company accounts for the license and the non-contingent deliverables as a single combined unit of accounting. Therefore, license revenue in the form of non-refundable upfront payments is deferred and recognized over the applicable
relationship period, which historically has been the estimated period of the Company&#146;s substantive performance obligations or the period the rights granted are in effect. The Company recognizes contingent event-based payments under license
agreements when the payments are received. The Company recognized an immaterial amount of license revenue from the receipt of upfront payments in the accompanying statement of operations. The Company has not received any royalty payments to date.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company will recognize a milestone payment when earned if it is substantive and the Company has no ongoing performance obligations
related to the milestone. A milestone payment is considered substantive if it: 1)&nbsp;is commensurate with either the Company&#146;s performance to achieve the milestone or the enhanced value of the delivered item as a result of a specific outcome
from the Company&#146;s performance to achieve the milestone; 2)&nbsp;relates solely to past performance;&nbsp;and 3)&nbsp;is reasonable relative to all of the deliverables and payment terms, including other potential milestone consideration, within
the arrangement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Amounts received prior to satisfying all revenue recognition criteria are recorded as deferred revenue in the
accompanying balance sheets. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">6 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company&#146;s deferred revenue comprises upfront payments received and is recognized over
the estimated relationship period. The Company received upfront payments of $313, $1,500 and $500 in August 2012,&nbsp;August 2013 and January 2014, respectively, which are recognized over periods of six months, 70 months and 48 months,
respectively. For the three months ended March&nbsp;31, 2014 and 2013, the Company recognized revenue from these upfront payments of $93 and $62, respectively. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Fair Value of Financial Instruments </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, based on the Company&#146;s principal or, in absence of a principal, most advantageous market for the specific asset or liability. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring
basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of
unobservable inputs when determining fair value. The three tiers are defined as follows: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Level 1 &#151; Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Level 2 &#151; Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Level 3 &#151; Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions about the assumptions market participants would use in pricing the asset or
liability based on the best information available in the circumstances. </TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Research and Development </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Major components of research and development costs include cash compensation, stock-based compensation, preclinical studies, clinical trial and
related clinical manufacturing, drug development, materials and supplies, legal, regulatory compliance, and fees paid to consultants and other entities that conduct certain research and development activities on the Company&#146;s behalf. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Amortization of Deferred Financing Costs and Debt Discount </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Amortization of deferred financing costs and debt discount includes the amortization of debt discount related to the warrants issued with the
convertible notes (Note 4), the amortization of issuance costs related to the convertible notes, and amortization of the deferred financing costs related to a deemed contribution for a guarantee from a related party. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Comprehensive Income or Loss </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company has no items of comprehensive income or loss other than net income or loss. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Income Taxes </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company
provides for deferred income taxes under the asset and liability method, whereby deferred income taxes result from temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements.
Valuation allowances are established when necessary to reduce deferred tax assets to the amount that the Company believes is more likely than not to be realized. The Company recognizes uncertain tax positions when the positions will be more likely
than not sustained based solely upon the technical merits of the positions. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">7 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Stock-Based Compensation </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company measures and recognizes compensation expense for all stock-based payment awards made to employees, officers, and directors based on
the estimated fair values of the awards as of grant date. The value of the portion of the award that is ultimately expected to vest is recorded as expense over the requisite service period. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company also accounts for equity instruments issued to non-employees using a fair value approach. The Company values equity instruments
and stock options granted to employees using the Black-Scholes valuation model. The measurement of non-employee share-based compensation is subject to periodic adjustments as the underlying equity instruments vest and is recognized as an expense
over the term of the related financing or the period over which services are received. The Company estimates the fair value of common stock warrants granted to lenders at their intrinsic value, which is the estimated fair value of the common stock
less the exercise price for the warrant. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Basic and Diluted Net Loss per Share of Common Stock </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company uses the two-class method to compute net loss per common share because the Company has issued securities, other than common stock,
that contractually entitle the holders to participate in dividends and earnings of the Company. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective
rights to receive distributed and undistributed earnings. Holders of each series of the Company&#146;s convertible preferred stock were entitled to participate in dividends, when and if declared by the board of directors that were made to common
stockholders, and as a result were considered participating securities. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>3.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Property and Equipment </B></TD></TR></TABLE>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Property and equipment consists of the following: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="68%"></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>March&nbsp;31,</B><br><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>December&nbsp;31,<BR>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Equipment</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">9,805</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">9,577</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Furniture and fixtures</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">378</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">378</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Leasehold improvements</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">13,115</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">13,115</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total property and equipment</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">23,298</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">23,070</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Less accumulated depreciation</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">17,977</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">17,669</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Property and equipment, net</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">5,321</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">5,401</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Depreciation expense for the three months ended March&nbsp;31, 2014 and 2013 was $308 and $ 347, respectively.
</P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>4.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Debt Obligations </B></TD></TR></TABLE>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Credit Facility Agreement </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In April 2010, the Company entered into a $15,000 credit facility agreement with HSBC Bank (the &#147;2010 Credit Agreement&#148;). The
agreement comprised a $5,000 term loan and a $10,000 revolving credit facility. Borrowings under the 2010 Credit Agreement carry interest at a rate of London InterBank Offered Rate plus 0.95%&nbsp;per annum. The 2010 Credit Agreement required
interest-only payments through March 2013 and was guaranteed by a related party that has an investment in the Company. All outstanding borrowings under the agreement were originally due on March&nbsp;11, 2013. The 2010 Credit Agreement contained no
financial covenants. On March&nbsp;8, 2013, the Company entered into an agreement to amend the 2010 Credit Agreement with HSBC </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">8 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Bank (the &#147;2013 Credit Agreement&#148;). The 2013 Credit Agreement requires interest-only payments through December 2014. All outstanding borrowings under the agreement were due on
December&nbsp;31, 2014. Other significant terms of the 2010 Credit Agreement remained the same, which includes the guarantee made by a related party that has an investment in the Company. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At the inception of the 2010 Credit Agreement, a deemed contribution in relation to the guarantee of the 2010 Credit Agreement was recognized
as deferred financing costs and amortized over the life of the loan.&nbsp;The value of the guarantee was determined based on the difference between the loan&#146;s stated interest rate and the interest rate that would apply if there had been no
guarantee from the related party.&nbsp;The Company determined the value of the 2010 Credit Agreement guarantee to be $6,338, which was amortized over the original life of the loan. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The 2013 Credit Agreement represents a new loan, and the Company determined the value of the extended guarantee under the 2013 Credit
Agreement to be $3,930, which is being amortized over the term of the 2013 Credit Agreement. The unamortized deferred financing costs of the deemed contribution related to the guarantee of the 2010 Credit Agreement amounting to $153 was expensed at
the date of the amendment. For the three months ended March&nbsp;31, 2014 and 2013, amortization of deferred financing costs was $536 and $709, respectively. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">For the three months ended March&nbsp;31, 2014 and 2013: the weighted-average interest rate was 1.19% and 1.37%, respectively; and the
interest expense recognized was $44 and $50, respectively. As of March&nbsp;31, 2014 and December&nbsp;31, 2013, both the $5,000 term loan and the $10,000 revolving credit facility were outstanding under the 2013 Credit Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On March&nbsp;17, 2014, the Company entered into an addendum to the guarantee agreement with the related party who guaranteed its 2013 Credit
Agreement. Under this addendum, the Company agreed: (i)&nbsp;to use $7,500 of the proceeds from the Company&#146;s planned IPO to repay a portion of the outstanding amounts under the 2013 Credit Agreement by June&nbsp;30, 2014; (ii)&nbsp;to amend
the 2013 Credit Agreement by June&nbsp;30, 2014 to reduce the aggregate amount the Company may borrow to $7,500; and (iii)&nbsp;to repay all amounts owed under the 2013 Credit Agreement by December&nbsp;31, 2014 in order to release the related party
from its obligations under the guarantee. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As described in Note 14, on May&nbsp;7, 2014, the entire outstanding balance of the 2013 Credit
Agreement amounting to $15,000 plus accrued interest, was paid in full using the proceeds from the IPO. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Future Debt Maturities
</I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Future debt maturities as of March&nbsp;31, 2014 were as follows: </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="68%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="84%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Due on December&nbsp;31, 2014</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">15,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">15,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Note and Warrant Purchase Agreements </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In December 2011, the Company executed a Note and Warrant Purchase Agreement (the &#147;December 2011 Note and Warrant Agreement&#148;) to
issue convertible notes in an aggregate amount not to exceed $15,000. In 2011 and 2012, under the December 2011 Note and Warrant Agreement, the Company issued convertible notes (the &#147;2011-2012 Notes&#148;) with a total principal amount of
$11,444 to related parties that hold investments in the Company. The 2011-2012 Notes included warrants to purchase 26,000 shares of the Company&#146;s common stock at $0.20 per share. The 2011-2012 Notes were convertible into shares of the
Company&#146;s stock under various methods as stipulated in the agreement. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">9 </P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In June 2013, the Company executed another Note and Warrant Purchase Agreement (the &#147;June
2013 Note and Warrant Agreement&#148;) with certain existing lenders. Under the June 2013 Note and Warrant Agreement, the lenders agreed to loan to the Company up to $1,500 in exchange for convertible notes (the &#147;June 2013 Notes&#148;). The
Company issued June 2013 Notes for an aggregate amount of $899. In addition, the Company agreed to issue warrants to purchase shares of the Company&#146;s common stock upon the request of a majority of the noteholders. The June 2013 Notes were
convertible into shares of the Company&#146;s stock using similar methods described in the 2011-2012 Notes. In addition, the June 2013 Notes include conversion of the entire outstanding principal and interest balance into equity securities upon the
closing of any equity financing at the option of the noteholders. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The 2011-2012 Notes and June 2013 Notes carried interest at a rate of
8%&nbsp;per annum and contained no financial covenants. The outstanding principal amount and unpaid accrued interest on the convertible notes issued under the December 2011 Note and Warrant Agreement and the June 2013 Note and Warrant Agreement were
originally due on December&nbsp;31, 2012 and December&nbsp;31, 2013, respectively, contingent upon (i)&nbsp;the prior written consent of holders of at least 70% of the outstanding aggregated principal amount of the convertible notes issued under the
same agreement, and (ii)&nbsp;the prior written consent of HSBC Bank for so long as any of the principal and interest related to the 2010 Credit Agreement or the 2013 Credit Agreement remained outstanding. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On the date of issuance, the fair value of warrants issued in the year ended December&nbsp;31, 2012 under the December 2011 Note and Warrant
Agreement was $328. The fair value of these warrants was accounted for as debt discount and amortized to expense over the stated term of the 2011-2012 Notes. The fair value of the obligation to issue warrants in connection with the June 2013 Notes
was $1,168. The fair value of the obligation to issue warrants was $269 above the face value of the June 2013 Notes and this excess was expensed at issuance. The $899 remaining amount of the fair value of the obligation to issue warrants was
accounted for as a debt discount and was amortized to expense over the term of the June 2013 Notes. The amount of the discount related to the 2011-2012 Notes&#146; warrants and the June 2013 Notes&#146; obligation to issue warrants that was
amortized to expense for the three months ended&nbsp;March 31, 2014 and 2013 was $0 for both periods. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On December&nbsp;11, 2013, the
noteholders elected to convert the June 2013 Notes into shares of Series&nbsp;D-2 convertible preferred stock. Under the election, the outstanding principal and accrued interest balance of $899 and $33, respectively, was converted into
665,542&nbsp;shares of Series&nbsp;D-2 convertible preferred stock at a conversion price of $1.40 per share. Consistent with the original terms of the June 2013 Notes, the conversion price was adjusted to $1.40&nbsp;per share because the Company
adjusted the conversion price of the 2011-2012 Notes in connection with the sale and issuance of shares of Series D-2 convertible preferred stock on December&nbsp;11, 2013 (Note&nbsp;6). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Also on December&nbsp;11, 2013, the noteholders elected to convert the 2011-2012 Notes into shares of Series&nbsp;D-1 and Series&nbsp;D-2
convertible preferred stock. Under the election, the outstanding principal and accrued interest balance of $11,444 and $1,640, respectively, was converted into 6,054,255&nbsp;shares of Series&nbsp;D-1 convertible preferred stock and
3,291,443&nbsp;shares of Series&nbsp;D-2 preferred stock at a conversion price of $1.40 per share. The conversion price of the 2011-2012 Notes was adjusted to $1.40 per share in connection with the sale and issuance of shares of Series D-2
convertible preferred stock on December&nbsp;11, 2013 (Note 6). </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>5.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Commitments and Contingencies </B></TD></TR></TABLE>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Leases </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company leases its facilities and certain office equipment under long-term non-cancelable operating leases. The Company&#146;s lease for
its primary North Carolina facility expires in 2019. The lease agreement includes a renewal option to extend the lease through March&nbsp;31, 2024. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">10 </P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Rent expense was approximately $231 and $223 for the three months ended March&nbsp;31, 2014 and
2013, respectively. Future minimum lease payments for all operating leases as of March&nbsp;31, 2014 are as follows: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="68%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="86%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">2014</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">797</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">2015</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,075</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">2016</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,104</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">2017</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,123</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">2018</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,156</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Thereafter</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">291</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">5,546</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>License Arrangement with Potential Future Expenditures </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As of March&nbsp;31, 2014, the Company had a license arrangement with Merck that involves potential future expenditures. Under the terms of the
license agreement, Merck is eligible to receive milestone payments that could total $19,000 from the Company upon initiation of SCY-078, the Company&#146;s lead product candidate, phase 2 and 3 clinical studies, new drug application, and marketing
approvals in each of the U.S., major European markets and Japan. In addition, Merck is eligible to receive tiered royalties from the Company based on a percentage of worldwide net sales of SCY-078. The aggregate royalties are mid- to high-single
digits. The Company has two additional licensing agreements that could require it to make payments of up to $2,300 upon achievement of certain milestones by the Company. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>6.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Convertible Preferred Stock </B></TD></TR></TABLE>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Convertible preferred stock has a par value $0.001 and was issued beginning in 2000. Each issuance is briefly described as
follows: </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Series&nbsp;A Convertible Preferred Stock (&#147;Series&nbsp;A Preferred&#148;) </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In 2000, the Company issued 31,407&nbsp;shares of Series&nbsp;A Preferred at $7.96 per share to its initial employees and consultants. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Series&nbsp;B Convertible Preferred Stock (&#147;Series&nbsp;B Preferred&#148;) </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In 2000, the Company issued 600,999&nbsp;shares of Series&nbsp;B Preferred at $9.01 per share in exchange for $2,200 in equipment, intellectual
property, and conversion of existing debt, and $3,215 in cash, and incurred issuance costs of $43. Subsequently in 2000, the Company issued an additional 110,988&nbsp;shares of Series&nbsp;B Preferred at $9.01 per share for cash. As part of the
issuance of the Series&nbsp;C convertible preferred stock in June 2002, the holders of Series&nbsp;B Preferred agreed to modify the redemption feature of the Series&nbsp;B Preferred to eliminate this feature. As described below, 244,173 shares of
Series B Preferred were mandatorily converted into common stock during 2012. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Series&nbsp;C Convertible Preferred Stock
(&#147;Series&nbsp;C Preferred&#148;) and Warrants </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company issued warrants to purchase 100,524&nbsp;shares of Series&nbsp;C
Preferred in conjunction with certain bridge loan financings during 2001 and the subsequent 2002 Series&nbsp;C Preferred financing. The warrants were issued with an exercise price of $0.01 per share. Two of the investors exercised such warrants
during 2003. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In 2002, the Company issued 2,867,154&nbsp;shares of Series&nbsp;C Preferred for $24,000 in cash and the conversion of
approximately $4,513 of 4.5% convertible notes and accrued interest, less issuance costs of approximately $86. As described below, 197,045 shares of Series C Preferred were mandatorily converted into common stock during 2012. In January&nbsp;2005,
the remaining warrants to purchase 23,911&nbsp;shares of Series&nbsp;C Preferred shares were exercised. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">11 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Series&nbsp;C-1 Convertible Preferred Stock (&#147;Series&nbsp;C-1 Preferred&#148;) and
Warrants </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In August 2004, the Company received cash of $3,200 for the issuance of 984,615&nbsp;shares of Series&nbsp;C-1 Preferred. As
described below, these Series C-1 Preferred shares were mandatorily converted into common stock during 2012. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In July 2006, the Company
issued warrants to purchase 196,923&nbsp;shares of Series&nbsp;C-1 Preferred in conjunction with a loan financing agreement. The warrants were issued with an exercise price of $3.25 per share and will expire on July&nbsp;14, 2016. The fair value at
the date of grant for these instruments was $459, which was recorded as a debt discount. The debt discount related to these warrants was fully amortized as of December&nbsp;31, 2010. The Company determined that the warrants should be recorded as a
derivative liability and stated at fair value at each reporting period. The Company recorded other income of $37 and $0 for the three months ended March 31, 2014 and 2013, respectively, related to the fair value adjustment for these warrants. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Series&nbsp;C-2 Convertible Preferred Stock (&#147;Series&nbsp;C-2 Preferred&#148;) </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In March 2008, the Company received cash of $13,500 for the issuance of 2,347,826&nbsp;shares of Series&nbsp;C-2 Preferred. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Series D-1 Convertible Preferred Stock (&#147;Series D-1 Preferred) and Series D-2 Convertible Preferred Stock (&#147;Series&nbsp;D-2
Preferred&#148;) </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On December&nbsp;11, 2013, the Company entered into an agreement to sell 1,785,712 shares of Series D-2 Preferred at
$1.40 per share for an aggregate price of $2,500 (the &#147;Series D-2 Purchase Agreement&#148;), less issuance costs of $95. With the sale of the Series D-2 Preferred on December&nbsp;11, 2013 at a price of $1.40 per share, the antidilution
provisions associated with the Series B Preferred, the Series C Preferred, the Series C-1 Preferred, and the Series C-2 Preferred were triggered. As of December&nbsp;11, 2013, the conversion price of the Series B Preferred, the Series C Preferred,
the Series C-1 Preferred, and the Series C-2 Preferred were reduced from $45.95, $51.77, $66.30, and $117.30, respectively, to $32.2912, $36.2386, $46.1101, and $78.9623, respectively. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Series&nbsp;D-2 Purchase Agreement also included warrants to purchase 87,532 shares of the Company&#146;s common stock at $0.20 per share.
The fair value of the warrants on the date of issuance was $4,214, which was recorded as a discount to the Series D-2 Preferred. The fair value of the warrants was $1,714 above the face amount of the Series&nbsp;D-2 Preferred and this excess was
expensed to derivative fair value adjustment at issuance. The Company calculated the fair value of the warrants as the difference between the estimated fair value of the common stock on December&nbsp;11, 2013 of $48.35 per share and the exercise
price per share of $0.20 multiplied by the number of shares of common stock issuable upon exercise of the warrants of 87,532. The Company determined that the warrants should be classified as a derivative liability and stated at fair value at each
reporting period. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Series D-2 Preferred was convertible into shares of common stock at a conversion price of $28.56&nbsp;per share.
Since the fair value of the common stock on December&nbsp;11, 2013 was $48.35, the Company determined that the sale of the Series D-2 Preferred resulted in a beneficial conversion feature. The Company calculated the intrinsic value of the beneficial
conversion feature as the difference between the estimated fair value of the common stock on December&nbsp;11, 2013 of $48.35 per share and the effective conversion price per share of $0 multiplied by the number of shares of common stock issuable
upon exercise of the warrants of 87,352. The intrinsic value was calculated at $4,232, which the Company recorded as a reduction to additional paid-in capital. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Concurrent with the sale of the Series D-2 Preferred, the Company modified the terms of the 2011-2012 Notes and the related warrants and the
June 2013 Notes and related warrants (Note 4). Under the amendments, the outstanding principal and accrued interest balance was converted into Series D-1 Preferred and Series D-2 Preferred at a conversion price of $1.40 per share. As a result of the
conversions, the Company issued 6,054,255 shares of Series&nbsp;D-1 Preferred and 3,956,985 shares of Series D-2 Preferred. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">12 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On January&nbsp;31, 2014, the Company sold to related parties 388,641&nbsp;shares of
Series&nbsp;D-2 Preferred under the Series&nbsp;D-2 Purchase Agreement at $1.40 per share, for an aggregate price of $544. The sale also included warrants to purchase 19,048&nbsp;shares of the Company&#146;s common stock at $0.20 per share. The fair
value of the warrants on the date of issuance was $906. The fair value of the warrants was $362 above the face amount of the Series D-2 Preferred and this excess was expensed to derivative fair value adjustment at issuance. The Company calculated
the fair value of the warrants as the difference between the estimated fair value of the common stock on January&nbsp;31, 2014 of $47.74 per share and the exercise price per share of $0.20 per share multiplied by the number of shares of common stock
issuable upon exercise of the warrants of 19,048. The warrants are classified as a derivative liability and stated at fair value at each reporting period. With the sale of the Series D-2 Preferred on January&nbsp;31, 2014 at a price of $1.40 per
share, the antidilution provisions associated with the Series B Preferred, the Series C Preferred, the Series C-1 Preferred, and the Series C-2 Preferred were triggered.&nbsp;As of January&nbsp;31, 2014, the conversion price of the Series B
Preferred, the Series C Preferred, the Series C-1 Preferred, and the Series C-2 Preferred were reduced from&nbsp;$32.2912, $36.2386, $46.1101, and $78.9623, respectively, to $32.0076, $35.8917, $45.6062, and $77.9382, respectively. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Authorized, Issued, and Outstanding Preferred Shares </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following table summarizes authorized, issued, and outstanding preferred shares as of March&nbsp;31, 2014: </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="50%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Authorized</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Outstanding</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Issue&nbsp;Price</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Liquidation<BR>Preference</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series A Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">31,410</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">31,407</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">7.96</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">250</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series B Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">711,987</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">467,814</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9.01</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,215</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series C Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,967,678</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,770,633</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10.15</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">28,121</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series C-1 Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,076,923</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3.25</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series C-2 Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,347,826</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,347,826</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5.75</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">13,500</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series D-1 Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,054,255</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1.40</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">16,952</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series D-2 Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,131,338</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1.40</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">25,752</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">29,135,824</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">17,803,273</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">88,790</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At March&nbsp;31, 2014, the convertible preferred stock has been adjusted to reflect the liquidation values
shown in the table above. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Preferred Stock Activity </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following table summarizes preferred stock activity for the three months ended March&nbsp;31, 2014: </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="38%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="26" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Shares of</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Series A<BR>Convertible<BR>Preferred<BR>Stock</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Series B<BR>Convertible<BR>Preferred<BR>Stock</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Series C<BR>Convertible<BR>Preferred<BR>Stock</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Series C-1<BR>Convertible<BR>Preferred<BR>Stock</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Series C-2<BR>Convertible<BR>Preferred<BR>Stock</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Series D-1<BR>Convertible<BR>Preferred<BR>Stock</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Series D-2<BR>Convertible<BR>Preferred<BR>Stock</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Balance, December&nbsp;31, 2013</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">31,407</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">467,814</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,770,633</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,347,826</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">6,054,255</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">5,742,697</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Issuance of Series D-2 Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">388,641</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Balance, March&nbsp;31, 2014</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">31,407</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">467,814</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,770,633</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,347,826</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">6,054,255</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">6,131,338</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Automatic Conversion of Preferred Stock </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On March&nbsp;13, 2014, the Company amended and restated its certificate of incorporation to require the automatic conversion of the
convertible preferred stock into common stock upon the completion of a public offering of common stock with gross proceeds of at least $20,000. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">13 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>



<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>7.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Common Stock </B></TD></TR></TABLE>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Authorized, Issued, and Outstanding Common Shares </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company&#146;s common stock has a par value of $0.001 per share and consists of 70,000,000 authorized shares at March&nbsp;31, 2014 and
December&nbsp;31, 2013, respectively, and 334,484 and 334,068 shares issued and outstanding at March&nbsp;31, 2014 and December&nbsp;31, 2013, respectively.&nbsp;The following table summarizes common stock shares activity for the three months ended
March&nbsp;31, 2014: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="68%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="78%"></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><B>Shares of<BR>Common&nbsp;Stock</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Balance, December&nbsp;31, 2013</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">334,068</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Exercise of stock options</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">416</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Balance, March&nbsp;31, 2014</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">334,484</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Shares Reserved for Future Issuance </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company had reserved shares of common stock for future issuance as follows: </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="78%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>March&nbsp;31,<BR>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>December&nbsp;31,<BR>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">For conversion of Series A Preferred, Series B Preferred, Series C Preferred,<BR>Series C-2 Preferred, Series D-1 Preferred, and Series
D-2 Preferred and exercise of warrants to purchase Series C-1 Preferred and subsequent conversion of the shares purchased</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,705,917</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,675,812</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Outstanding stock options</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">184,240</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">137,610</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Outstanding common stock warrants</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">276,304</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">257,242</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">For possible future issuance under stock option plan</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,687</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">49,734</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total common shares reserved for future issuance</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,169,148</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,120,398</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Warrants issued from the Note and Warrant Purchase Agreements </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company had outstanding common stock warrants issued in connection with the Note and Warrant Purchase Agreements the Company executed in
December 2011 and June 2013 (Note 4). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The 2011-2012 Notes included warrants to purchase 26,000 shares of the Company&#146;s common stock
at $0.20 per share. The warrants could be exercised for shares of common stock, in accordance with the Note and Warrant Purchase Agreements, at the earliest of: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(i)</TD>
<TD ALIGN="left" VALIGN="top">The date the related convertible notes were converted, </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(ii)</TD>
<TD ALIGN="left" VALIGN="top">The date the related convertible notes were repaid or prepaid in full, and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(iii)</TD>
<TD ALIGN="left" VALIGN="top">June&nbsp;30, 2012. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">These warrants would expire on June&nbsp;30, 2017, and would terminate
unless exercised prior to an IPO. The number of shares of common stock that may be purchased by exercising the warrants is calculated as follows: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">If a related convertible note is converted pursuant to and in accordance with the terms within the Note and Warrant Purchase Agreements (Note 4), then the number of shares of common stock shall be equal to the quotient
of (A)&nbsp;the product of (i)&nbsp;20% multiplied by (ii)&nbsp;the principal amount of the convertible note divided by (B)&nbsp;the applicable per share conversion price at which the related convertible note is so converted; or </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">14 </P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">If a related convertible note is repaid or prepaid in full prior to the conversion thereof pursuant to and in accordance with the terms within the Note and Warrant Purchase Agreements (Note 4), then the number of shares
of common stock shall be equal to the quotient of (A)&nbsp;the product of (i)&nbsp;20% multiplied by (ii)&nbsp;the principal amount of the convertible note divided by (B)&nbsp;$87.98 (subject to proportionate adjustment upon any adjustment to the
Series D-1 Preferred or Series D-2 Preferred conversion price); or </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">If a warrant is first exercised at any time after June&nbsp;30, 2012, and such first exercise of the warrant occurs prior to the conversion, repayment or prepayment of the related convertible note pursuant to and in
accordance with the terms within the Note and Warrant Purchase Agreements (Note 4), then the number of shares of common stock shall be equal to the quotient of (A)&nbsp;the product of (i)&nbsp;20% multiplied by (ii)&nbsp;the principal amount of the
convertible note divided by (B)&nbsp;$87.98 (subject to proportionate adjustment upon any adjustment to the Series D-1 Preferred or Series D-2 Preferred conversion price). </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On December&nbsp;11, 2013, holders of the June 2013 Notes, under the June 2013 Note and Warrant Agreement, exercised their rights under the
June 2013 Note and Warrant Agreement to receive warrants to purchase shares of the Company&#146;s common stock. As a result of this exercise, the Company issued warrants to purchase 88,987&nbsp;shares of the Company&#146;s common stock to the
holders of the June 2013 Notes at an exercise price of $0.20 per share. These warrants were exercisable until June&nbsp;28, 2018, and would terminate unless exercised prior to an IPO. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On December&nbsp;11, 2013, in connection with the Series D-2 Purchase Agreement (Note 6), the Company issued warrants to purchase 87,532
shares of the Company&#146;s common stock at an exercise price of $0.20 per share. These warrants were exercisable until December&nbsp;11, 2018. In addition, as a result of the conversion of the principal and interest outstanding on the 2011-2012
Notes into Series D-1 Preferred and Series D-2 Preferred (Note 6), in accordance with the amended terms of the agreement, the number of common shares underlying the warrants issued in connection with the 2011-2012 Notes was increased by 54,120 to a
total of 80,120. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">There were no warrants exercised during the three month periods ended March&nbsp;31, 2014 and 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">These warrants meet the definition of a derivative financial instrument and are accounted for as derivatives. The combined fair values of the
common stock warrant derivative liabilities, including warrants issued with the sale of Series D-2 Preferred, are $9,998 and $12,200 as of March&nbsp;31, 2014 and December&nbsp;31, 2013, respectively, and are recorded as a long-term derivative
liability in the accompanying balance sheets. The Company recorded other income of $3,108 and other income/loss of $0 for the three months ended March&nbsp;31, 2014 and 2013, respectively, related to the fair value adjustment of the long-term
derivative liability for common stock warrants. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>8.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Stock-based Compensation </B></TD></TR></TABLE>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>2009 Stock Option Plan </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company has a share-based compensation plan (the &#147;2009 Stock Option Plan&#148;) under which the Company may grant options to purchase
shares of common stock to employees, directors, and consultants as either incentive stock options or nonqualified stock options. Incentive stock options may be granted with exercise prices not less than 100% to 110% of the fair market value of the
common stock. Options granted under the plan generally vest over three to four years and expire in 10 years from the date of grant. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The
compensation cost that has been charged against income for stock awards under 2009 Stock Option Plan for the three months ended March&nbsp;31, 2014 and 2013 was $110 and $42, respectively. The total income tax benefit recognized in the statements of
operations for share-based compensation arrangements was $0 for the three months ended March&nbsp;31, 2014 and 2013. Cash received or receivable from options exercised was $5 and $5 for the three months ended March&nbsp;31, 2014 and the year ended
December&nbsp;31, 2013, respectively. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">15 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Stock-based compensation expense related to stock options is included in the following line items
in the accompanying statements of operations: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="65%"></TD>
<TD VALIGN="bottom" WIDTH="15%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="15%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Three&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2014&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2013&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cost of revenue</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">13</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">11</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research and development</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">62</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Selling, general and administrative</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">35</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">24</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">110</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">42</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>2014 Equity Incentive Plan </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In February 2014, the Company&#146;s board of directors adopted the 2014 Equity Incentive Plan, which was subsequently ratified by its
stockholders and became effective on May&nbsp;2, 2014 (the &#147;Effective Date&#148;). The 2014 Equity Incentive Plan is the successor to and continuation of the 2009 Stock Option Plan. On the effective date, no additional awards will be granted
under the 2009 Stock Option Plan, and all stock awards granted under the 2009 Stock Option Plan will remain subject to the terms of the 2009 Stock Option Plan. All awards granted on and after the effective date will be subject to the terms of the
2014 Equity Incentive Plan. The 2014 Equity Incentive Plan provides for the grant of the following awards: (i)&nbsp;incentive Stock Options, (ii)&nbsp;nonstatutory stock options, (iii)&nbsp;stock appreciation rights, (iv)&nbsp;restricted stock
awards, (v)&nbsp;restricted stock unit awards, and (vi)&nbsp;other stock awards. Employees, directors, and consultants are eligible to receive awards. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Under the 2014 Equity Incentive Plan, the aggregate number of shares of common stock that may be issued from and after the effective date (or
the &#147;share reserve&#148;) will not exceed the sum of 257,352 new shares, the shares that represented the 2009 Stock Option Plan&#146;s available reserve on the effective date, and any returning shares from the 2009 Stock Option Plan. The share
reserve will automatically increase on January&nbsp;1<SUP STYLE="font-size:85%; vertical-align:top">st</SUP> of each year, for a period of not more than ten years, commencing on January&nbsp;1, 2015 and ending on January&nbsp;1, 2024, in an amount
equal to 4.0% of the total number of shares of Capital Stock outstanding on December&nbsp;31<SUP STYLE="font-size:85%; vertical-align:top">st</SUP> of the preceding calendar year. The board of directors may act prior to January&nbsp;1<SUP
STYLE="font-size:85%; vertical-align:top">st</SUP> of a given year to provide that there will be no increase in the share reserve or that the increase will be a lesser number of shares than would otherwise occur. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>2014 Employee Stock Purchase Plan </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In
February 2014, the Company&#146;s board of directors adopted the 2014 Employee Stock Purchase Plan (&#147;ESPP&#148;), which was subsequently ratified by the Company&#146;s stockholders and became effective on May&nbsp;2, 2014. The purpose of the
ESPP is to provide means by which eligible employees and certain designated related corporations may be given an opportunity to purchase shares of the Company&#146;s common stock, and to seek and retain services of new and existing employees and to
provide incentives for such persons to exert maximum efforts for the success of the Company. Common stock that may be issued under the ESPP will not exceed 47,794 shares, plus the number of shares of common stock that are automatically added on
January&nbsp;1<SUP STYLE="font-size:85%; vertical-align:top">st</SUP> of each year for a period of ten years, commencing on January&nbsp;1, 2015 and ending on January&nbsp;1, 2024, in an amount equal to the lesser of (i)&nbsp;0.8% of the total
number of shares of outstanding common stock on December&nbsp;31 of the preceding calendar year, and (ii)&nbsp;29,411 shares of common stock. Similar to the 2014 Equity Incentive Plan, the board of directors may act prior to January&nbsp;1<SUP
STYLE="font-size:85%; vertical-align:top">st</SUP> of a given year to provide that there will be no increase in the share reserve or that the increase will be a lesser number of shares than would otherwise occur. The ESPP is intended to qualify as
an &#147;employee stock purchase plan&#148; within the meaning of Section&nbsp;423 of the Internal Revenue Code. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>9.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Income Taxes </B></TD></TR></TABLE>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company did not record a federal or state income tax benefit for the three months ended March&nbsp;31, 2014 and 2013 due
to its conclusion that a full valuation allowance is required against the Company&#146;s deferred tax assets. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">16 </P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>10.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Net Loss Per Share </B></TD></TR></TABLE>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company uses the two-class method to compute net loss per share because the Company has issued securities, other than
common stock, that contractually entitle the holders to participate in dividends and earnings of the Company. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Under the two-class method,
for periods with net income, basic net income per common share is computed by dividing the net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Net income attributable
to common stockholders is computed by subtracting from net income the portion of current year earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the year&#146;s earnings been
distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses. Diluted net loss per common share is computed under the two-class method by using
the weighted average number of shares of common stock outstanding, plus, for periods with net income attributable to common stockholders, the potential dilutive effects of stock options and warrants. In addition, the Company analyzes the potential
dilutive effect of the outstanding participating securities when calculating diluted earnings per share. Under the &#147;treasury stock&#148; method, it is assumed that the warrants and options were exercised at the beginning of the period and that
the funds obtained from the exercise were used to reacquire the Company&#146;s common stock at the average market price for the period. Under the &#147;if-converted&#148; method, it is assumed that the outstanding participating securities convert
into common stock at the beginning of the period. The Company reports the more dilutive of the approaches as its diluted net income per share during the period. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following table summarizes the computation of basic and diluted net loss per share attributable to the Company&#146;s common stockholders:
</P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="76%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Three&nbsp;months&nbsp;ended&nbsp;March&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2014&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2013&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net Income/(loss)</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">412</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(2,069</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deemed dividend for beneficial conversion feature on Series D-2 Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(909</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deemed dividend for antidilution adjustments to convertible preferred stock</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(214</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accretion of convertible preferred stock</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(510</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Net loss attributable to common stock - basic</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>$</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>(1,221</B></TD>
<TD NOWRAP VALIGN="bottom"><B>)&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>$</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>(2,069</B></TD>
<TD NOWRAP VALIGN="bottom"><B>)&nbsp;</B></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:1pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Derivative fair value adjustment</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(2,783</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Net loss attributable to common stock - diluted</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>$</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>(4,004</B></TD>
<TD NOWRAP VALIGN="bottom"><B>)&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>$</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>(2,069</B></TD>
<TD NOWRAP VALIGN="bottom"><B>)&nbsp;</B></TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Weighted-average common shares outstanding - basic</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>334,086</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>335,782</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Allocation of common stock warrants as participating securities</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">274,988</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Weighted-average of outstanding common stock - diluted</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>609,075</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>335,782</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Net loss per share</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Basic EPS</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(3.65</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(6.16</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Diluted EPS</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(6.57</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(6.16</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">17 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following securities, presented on a common stock equivalent basis, have been excluded from
the calculation of weighted average common shares outstanding because the effect is anti-dilutive: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="74%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Three Months Ended<BR>March&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Convertible preferred stock:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series A Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,149</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,149</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series B Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">131,685</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">93,568</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series C Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">783,515</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">554,181</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series C-2 Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">173,213</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">119,958</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series D-1 Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">296,773</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series D-2 Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">300,549</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Warrants to purchase Series C-1 Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">14,033</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,847</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Warrants to purchase common stock</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">26,603</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Stock options</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">184,240</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">152,464</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Convertible notes</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">430,493</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>11.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Related-Party Transactions </B></TD></TR></TABLE>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company had transactions with related parties as follows: </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" ALIGN="center">


<TR>
<TD WIDTH="62%"></TD>
<TD VALIGN="bottom" WIDTH="13%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="13%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Three&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2014&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2013&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Revenue</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,822</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,822</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Travel expense</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">16</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Sanofi owns 100% of a subsidiary that is a customer of the Company. Both Sanofi and the subsidiary have an
investment in the Company. The Company&#146;s related-party revenue with the subsidiary composed 39% and 38% of total revenue as of March&nbsp;31, 2014 and 2013, respectively. </P>
<P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>12.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Fair Value Measurements </B></TD></TR></TABLE>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, unbilled
services, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their respective fair values due to the short-term nature of such instruments. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Assets and Liabilities Measured at Fair Value on a Recurring Basis </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate
level in which to classify them for each reporting period. This determination requires significant judgments to be made. The following table summarizes the conclusions reached as of March&nbsp;31, 2014 and December&nbsp;31, 2013: </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="46%"></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Balance&nbsp;as&nbsp;of<BR>March&nbsp;31,&nbsp;2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Quoted&nbsp;Prices&nbsp;in<BR>Active&nbsp;Markets&nbsp;for<BR>Identical Assets</B><br><B>(Level 1)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Significant&nbsp;Other<BR>Observable&nbsp;Inputs</B><br><B>(Level 2)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Significant<BR>Unobservable<BR>Inputs</B><br><B>(Level 3)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Derivative liability &#151; Series C-1 warrants</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Derivative liability &#151; common stock warrants</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,998</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,998</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total derivative liability</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">9,998</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">9,998</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">18 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


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<TR>
<TD WIDTH="44%"></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Balance&nbsp;as&nbsp;of</B><br><B>December&nbsp;31,&nbsp;2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Quoted&nbsp;Prices&nbsp;in<BR>Active&nbsp;Markets&nbsp;for<BR>Identical Assets</B><br><B>(Level 1)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Significant&nbsp;Other<BR>Observable&nbsp;Inputs</B><br><B>(Level 2)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Significant<BR>Unobservable<BR>Inputs</B><br><B>(Level 3)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Derivative liability &#151; Series C-1 warrants</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">37</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">37</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Derivative liability &#151; common stock warrants</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">12,200</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">12,200</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total derivative liability</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">12,237</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">12,237</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company&#146;s derivative liabilities are the only balance sheet amounts that are measured at fair value
on a recurring basis. The fair value of these warrant derivatives is based on a valuation of the Company&#146;s common stock. In order to determine the fair value of the Company&#146;s common stock, the Company used a probability-weighted expected
return method, or PWERM. Significant inputs for the PWERM included an estimate of the Company&#146;s equity value, a weighted average cost of capital and an estimated probability and timing for each valuation scenario. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">A reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) is as follows: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="68%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="72%"></TD>
<TD VALIGN="bottom" WIDTH="21%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Three&nbsp;months&nbsp;ended<BR>March&nbsp;31, 2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Beginning balance, December&nbsp;31, 2013</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">12,237</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Issuance of warrants</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">544</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Excess of fair value of warrants over proceeds</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">362</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Adjustment to fair value</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(3,145</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Ending balance, March&nbsp;31, 2014</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">9,998</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>13.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Significant Agreements </B></TD></TR></TABLE>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In August 2013, the Company entered into a development, license, and supply agreement with R-Pharm, CJSC
(&#147;R-Pharm&#148;), granting it exclusive rights to develop and commercialize an anti-fungal drug (SCY-078) in the field of human health in Russia and certain smaller non-core markets. The Company received an upfront payment of $1,500, and is
entitled to receive payments on contingent events, including 1) a development milestone payment of $3,000 upon the first registration of SCY-078 in any country covered by the agreement; 2) sales-based payments of up to $15,000 upon R-Pharm&#146;s
achievement of specified targets for cumulative net sales of SCY-078; and 3) percentage royalties of up to the mid-teens on SCY-078 net sales. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company deferred the upfront payment received and is recognizing it over the estimated relationship period of 70 months, which includes
the product development period and an additional period during which the Company is required to participate in a product development committee. The development milestone payment is considered substantive and will be recognized when R-Pharm achieves
certain specified milestones. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The sales-based payments will not be recognized until the Company 1) receives the payments, and 2) has no
continuing performance obligations. If the Company has any continuing performance obligations when the sales-based payments are received, those payments will be deferred and recognized over the remaining period of continuing performance obligations.
Royalties will be recognized when payment is received. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In December 2013, the Company entered into a licensing agreement with Elanco
Animal Health (Elanco). The agreement includes an upfront payment of $500 and multi-year contract research and development services with fees of $2,750 annually for the first two years and $3,000 annually for the second two years, and entitles the
Company to: 1) development milestone payments of up to $1,500 for each compound Elanco and the Company </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">19 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
decide to develop; 2) a one-time payment of up to $2,000 for the first regulatory approval of any product in the U.S.; 3) a one-time payment of $4,000 for the first commercial sale of a product
in the U.S. and a one-time payment of $1,500 for the first commercial sale of a product in the European Union; 4) one-time payments of up to $15,000 for reaching specified annual sales of a product; and 5) mid-single-digit percentage royalties on
net annual sales. The Company has deferred the upfront payment, which it received in January 2014, and is recognizing the revenue over the research and development period of 48 months. </P>
<P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>14.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Subsequent Events </B></TD></TR></TABLE>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Reverse Stock Split </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On
April&nbsp;25, 2014, the Company amended its amended and restated certificate of incorporation to implement a 1-for-5.1 reverse stock split of its common stock. The reverse stock split did not cause an adjustment to the par value or the authorized
shares of the common stock. As a result of the reverse stock split, the Company also adjusted the share amounts under its employee incentive plans, outstanding options and common stock and preferred stock warrant agreements with third parties. All
disclosures of common shares and per common share data in the accompanying interim financial statements and related notes have been adjusted to reflect the reverse stock split for all periods presented. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On April&nbsp;29, 2014, the Company lowered the exercise price per share of options to purchase 53,404 shares of common stock to an amount
equal to $10 per share, the initial public offering price per share in the IPO. The original exercise prices of such options ranged from $20.40 to $61.20 per share, with a weighted average exercise price of $54.87 per share. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Addendum to Guarantee Agreement </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On
April&nbsp;29, 2014, the Company entered into an addendum to the guarantee agreement with the related party guaranteeing its 2013 Credit Agreement. Under this addendum and conditioned upon the closing of the IPO, the parties agreed to terminate the
Company&#146;s obligations made under the addendum dated March&nbsp;17, 2014 (Note 4). In addition, the Company agreed that to the extent the related party guarantor invested in the IPO, the amount to be invested by the related party guarantor would
be used to pay down the outstanding balance under the 2013 Credit Agreement. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Initial Public Offering </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On May&nbsp;7, 2014, the Company completed the initial public offering (IPO) of its common stock pursuant to a Registration Statement on Form
S-1. In the IPO, the Company sold an aggregate of 6,200,000 shares of common stock under the Registration Statement at a public offering price of $10 per share. On May&nbsp;7, 2014, the Company received net proceeds of approximately $54.8 million,
after deducting underwriting discounts and commissions of $3.3 million and offering expenses of $3.9 million. Upon the completion of the IPO, the $15.0 million outstanding debt under the 2013 Credit Agreement plus interest was paid in full and all
outstanding shares of the Company&#146;s convertible preferred stock and common stock warrants issued with the convertible notes and convertible preferred stock were converted into 1,967,571 shares of common stock. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Pro Forma Balance Sheet </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The balance
sheet data below show, on a pro forma basis, the impact on certain balance sheet items of significant equity transactions, which occurred subsequent to March&nbsp;31, 2014. The pro forma balance sheet data give effect to the following in connection
with the completion of the IPO on May&nbsp;7, 2014: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(i)</TD>
<TD ALIGN="left" VALIGN="top">the sale of 6,200,000 shares of common stock at a price of $10 per share to the public in the IPO, net of underwriting discounts and unpaid offering costs; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(ii)</TD>
<TD ALIGN="left" VALIGN="top">the payment in full of the $15.0 million debt outstanding under the 2013 Credit Agreement; </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">20 </P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(iii)</TD>
<TD ALIGN="left" VALIGN="top">the amortization in full of the outstanding balance of the deferred financing costs of $1,608 upon full payment of the outstanding debt; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(iv)</TD>
<TD ALIGN="left" VALIGN="top">the conversion of all of the Company&#146;s outstanding convertible preferred stock into an aggregate of 1,691,884 shares of common stock; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(v)</TD>
<TD ALIGN="left" VALIGN="top">the issuance of 275,687 shares of common stock pursuant to the exercise of outstanding warrants to purchase common stock issued with the Company&#146;s convertible notes and convertible preferred stock;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(vi)</TD>
<TD ALIGN="left" VALIGN="top">the elimination of the deferred offering costs of $3,645, and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(vii)</TD>
<TD ALIGN="left" VALIGN="top">the elimination of the $9,998 derivative liability upon exercise of the warrants to purchase common stock. </TD></TR></TABLE>
 <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Selected Balance Sheet Data </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="74%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Actual as of<BR>March&nbsp;31,&nbsp;2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Pro&nbsp;Forma&nbsp;as&nbsp;of<BR>March&nbsp;31, 2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cash and cash equivalents</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">650</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">42,435</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">12,978</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">49,510</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Current portion of long-term debt</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">15,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Derivative liability</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">9,998</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total liabilities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">33,403</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">6,690</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series A Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">250</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series B Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">4,215</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series C Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">28,121</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series C-2 Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">13,500</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series D-1 Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">16,952</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Series D-2 Preferred</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">25,752</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total stockholders&#146; (deficit) equity</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(109,215</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">42,820</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total liabilities, redeemable convertible preferred stock, and stockholders&#146; deficit</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">12,978</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">49,510</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">21 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc722469_6"></A>Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Operating results for the three months ended March&nbsp;31, 2014, are not necessarily indicative of results
that may occur in future interim periods or for the full fiscal year. </I></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>This Quarterly Report on Form&nbsp;10-Q contains statements
indicating expectations about future performance and other forward-looking statements within the meaning of Section&nbsp;27A of the Securities Act, and Section&nbsp;21E of the Exchange Act, that involve risks and uncertainties. We usually use words
such as &#147;may,&#148; &#147;will,&#148; &#147;should,&#148; &#147;could,&#148; &#147;expect,&#148; &#147;plan,&#148; &#147;anticipate,&#148; &#147;believe,&#148; &#147;estimate,&#148; &#147;predict,&#148; &#147;intend,&#148; or the negative of
these terms or similar expressions to identify these forward-looking statements. These statements appear throughout this Quarterly Report on Form&nbsp;10-Q and are statements regarding our current expectation, belief or intent, primarily with
respect to our operations and related industry developments. Examples of these statements include, but are not limited to, statements regarding the following: our business and scientific strategies; the progress of our and our collaborators&#146;
product development programs, including clinical testing, and the timing of results thereof; our corporate collaborations and revenues that may be received from our collaborations and the timing of those potential payments; our expectations with
respect to regulatory submissions and approvals;&nbsp;our drug discovery technologies; our research and development expenses; protection of our intellectual property; sufficiency of our cash and capital resources and the need for additional capital;
and our operations and legal risks. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including as a
result of the risks and uncertainties discussed under the heading &#147;Risk Factors&#148; in Item&nbsp;1A of Part&nbsp;II of this Quarterly Report on Form&nbsp;10-Q. Any forward-looking statement speaks only as of the date on which it is made, and
we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is
not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements. </I></P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Overview </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We are a pharmaceutical company committed to the discovery, development and commercialization of novel anti-infectives to address significant
unmet therapeutic needs. We are developing our lead product candidate, SCY-078, as a novel oral and intravenous (IV) drug for the treatment of serious and life-threatening invasive fungal infections in humans. SCY-078 has been shown to be effective
<I>in vitro </I>and <I>in vivo </I>in animal studies against a broad range of <I>Candida </I>and <I>Aspergillus</I> fungal species, including drug resistant strains. These important pathogens account for approximately 85% of invasive fungal
infections in the United States and Europe. SCY-078 was shown to be sufficiently safe and well-tolerated in multiple Phase 1 studies to support progression to Phase 2 studies. We anticipate that the first patient will be enrolled in the second half
of 2014 in a Phase 2 study with an oral formulation of SCY-078 for the treatment of invasive <I>Candida </I>infection, a common and often fatal invasive fungal infection, and anticipate beginning studies with an IV formulation of SCY-078 in 2015. In
addition to pursuing the development of SCY-078, we are planning to use our platform of enfumafungin derivatives and expertise to expand our anti-fungal portfolio. We also have clinical and preclinical assets based on the use of cyclophilin
inhibitors to treat viral diseases, and provide contract research and development services, primarily in the field of animal health, which currently generate substantially all of our revenue. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We are an emerging growth company. Under the Jumpstart Our Business Startups Act of 2012, or JOBS Act, emerging growth companies can delay
adopting new or revised accounting standards until such time of those standards apply to private companies. We have irrevocably elected not to adopt this exemption from new or revised accounting standards, and therefore, we will be subject to the
same new or revised accounting standards as other public companies that are not &#147;emerging growth companies.&#148; </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">22 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As a spinout from Aventis in 2000, we began as a chemistry and animal health services company,
providing contract research services to third parties. Through the provision of these contract research and development services, we built significant expertise in parasitic infections and drug discovery. Since our formation, we have expanded our
animal health capabilities and have discovered a number of proprietary compounds. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The majority of the cash generated by the provision of
contract research and development services and the additional capital we have raised has been used to develop proprietary compounds, including SCY-635, our cyclophilin inhibitor compound. In 2013, we exclusively licensed SCY-078 from Merck
Sharp&nbsp;&amp; Dohme, or Merck, in the field of human health, and Merck transferred to us the investigational new drug application pending with the U.S. Food and Drug Administration, or the FDA, as well as all data Merck had developed for the
compound, plus active pharmaceutical ingredient and tablets. In 2014, Merck assigned the patents to us related to SCY-078 that it had exclusively licensed to us. We are currently seeking a partner for SCY-635 and our cyclophilin inhibitor platform,
and are focusing our resources on the development of SCY-078. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Recent Developments </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On May&nbsp;7, 2014, we completed our IPO, whereby we sold a total of 6,200,000 shares of our common stock at $10 per share for net proceeds of
$54.8 million (after underwriting discounts, commissions, and estimated offering costs). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On May&nbsp;7, 2014, $15.0 million of the
proceeds from the IPO, which was invested by the related party who guaranteed the 2013 Credit Agreement, was used to pay in full the outstanding borrowings under the 2013 Credit Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On May&nbsp;7, 2014, upon completion of our IPO, all outstanding shares of our redeemable convertible preferred stock were converted into
1,691,884 shares of common stock, and all outstanding warrants issued with our convertible notes to purchase common stock were exercised with respect to 275,687 shares of our common stock in which we received proceeds of $0.1 million in connection
with such exercise. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Collaborations and Licensing Agreements </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We have signed a number of licensing and collaboration agreements with partners in human and animal health, including: (1)&nbsp;Merck, a
pharmaceutical company, under which we exclusively licensed from Merck its rights to SCY-078 in the field of human health, and agreed to pay Merck milestones upon the occurrence of specified events and will pay tiered royalties based on worldwide
sales of SCY-078 when and if it is approved (in 2014, Merck assigned the patents to us related to SCY-078 that it had exclusively licensed to us and, as contemplated by the agreement, we will continue to pay milestones and royalties);
(2)&nbsp;Merial, a wholly owned subsidiary of Sanofi, under which we provide animal health research services on a fee for service basis and, with respect to certain product candidates, potential milestones and royalties; (3)&nbsp;R-Pharm, CJSC, a
leading supplier of hospital drugs in Russia, granting them exclusive rights in the field of human health to develop and commercialize SCY-078 in Russia and several smaller non-core markets, under which we are entitled to receive potential
milestones and royalties; and (4)&nbsp;Dechra Ltd., a UK listed international veterinary pharmaceutical business, granting Dechra rights to SCY-641 in the field of animal health, including dog dry eye, under which we are entitled to receive
potential milestones and royalties. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Components of Operating Results </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Revenue </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">To date, we have
derived substantially all of our revenue from the provision of our contract research and development services. In addition, we have received upfront and milestone payments in connection with our collaboration and licensing agreements. We expect that
any revenue we generate will fluctuate from quarter to quarter as a result of the variability in the amounts of our contract research and development services provided, the achievement of collaboration milestones, and the consummation of new
licensing arrangements. We do not </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">23 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
expect to generate revenue from product sales for at least the next several years. If we or our collaborators fail to complete the development of product candidates in a timely manner or obtain
their regulatory approval, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Revenue is recognized when all of the following conditions are met: (1)&nbsp;persuasive evidence of an arrangement exists, (2)&nbsp;rendering
of services is complete, (3)&nbsp;fees are fixed or determinable, and (4)&nbsp;collection of fees is reasonably assured. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Cost of
Revenue </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Cost of revenue primarily consists of salaries and personnel-related costs, including employee benefits and any stock-based
compensation. Additional expenses include facilities and equipment costs directly associated with generating revenue, allocated overhead, materials, contracted consultants and other direct costs. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We allocate expenses associated with our facilities, information technology costs, and depreciation and amortization, between cost of revenue
and operating expenses. Allocations are based on employee headcount and determined by the nature of work performed. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Research and
Development Expense </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Research and development expense consists of expenses incurred while performing research and development
activities to discover, develop or improve potential product candidates we seek to develop. This includes conducting preclinical studies and clinical trials, manufacturing development efforts and activities related to regulatory filings for product
candidates. We recognize research and development expenses as they are incurred. Our research and development expense primarily consists of: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">salaries and personnel-related costs, including benefits and any stock-based compensation for personnel in research and development functions; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">costs related to executing preclinical and clinical trials; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">fees paid to consultants and other third parties who support our product candidate development and intellectual property protection; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">other costs in seeking regulatory approval of our products; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">allocated overhead. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The table below summarizes the total costs incurred for each of our key
research and development projects during the periods presented: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" ALIGN="center">


<TR>
<TD WIDTH="56%"></TD>
<TD VALIGN="bottom" WIDTH="16%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="16%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>For&nbsp;the&nbsp;Three&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2014&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2013&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center">(dollars in thousands)</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cyclophilin Inhibitor Platform</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">480</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">996</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">SCY-078</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">840</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">158</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total Research and Development</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>$</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>1,320</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>$</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>1,154</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Our cyclophilin inhibitor platform and SCY-078 projects were the only key research and development projects
during the periods presented. We plan to increase our research and development expense for the foreseeable future as we continue our effort to develop SCY-078 and to further advance the development of our other product candidates, subject to the
availability of additional funding. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">24 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The successful development of product candidates is highly uncertain. At this time, we cannot reasonably estimate
the nature, timing or costs required to complete the remaining development of any product candidates. This is due to the numerous risks and uncertainties associated with the development of product candidates. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><I>Selling, General and Administrative Expense </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Selling, general and administrative expense consists primarily of salaries and personnel-related costs, including employee benefits and any
stock-based compensation. This includes personnel in executive, finance, sales, human resources and administrative support functions. Other expenses include facility-related costs not otherwise allocated to cost of revenue or research and
development expense, professional fees for auditing, tax and legal services, consulting costs for general and administrative purposes, information systems maintenance and marketing efforts. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We expect that our selling, general and administrative expense will increase as we operate as a public reporting company and develop and
commercialize SCY-078. We believe that these increases will likely include increased costs for director and officer liability insurance, costs related to the hiring of additional personnel, and increased fees for outside consultants, lawyers and
accountants. We also expect to incur increased costs to comply with corporate governance, internal controls, investor relations, disclosure and similar requirements applicable to public reporting companies. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Gain on Sale of Asset </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In
May 2012, we sold the rights to internally developed research software to a third-party for $4.5 million. We received an initial payment of $3.5 million in May 2012, and subsequent payment of $0.5 million in February 2013. We recorded these payments
as a gain on sale of asset within total operating expenses in the period payment was received, net of transaction expenses. A final payment of $0.5 million was recorded in May 2013 that completed the sale transaction. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Other Income (Expense) </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Substantially all of our other income (expense) consists of non-cash costs associated with: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">a related party guarantee of our outstanding credit facility; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">interest on related party convertible debt; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">fair value adjustments to our derivative liability for warrants issued in conjunction with the related party convertible debt. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Interest paid on our outstanding bank debt comprises substantially all of the remaining other income (expense). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In April 2010, we entered into a $15.0 million credit facility agreement with HSBC Bank USA, National Association, or HSBC, which we refer to
as the 2010 Credit Agreement. This 2010 Credit Agreement was guaranteed by a related party. We concluded that the guarantee represents a deemed contribution and recognized the value of the guarantee as deferred financing costs. The value of the
guarantee was determined based on the difference between the 2010 Credit Agreement&#146;s stated interest rate and the interest rate that would apply if there had been no guarantee from the related party. The value was determined to be $6.3 million
at the time the 2010 Credit Agreement was established and was amortized over the life of the 2010 Credit Agreement. On March&nbsp;8,&nbsp;2013, the 2010 Credit Agreement and related party guarantee were extended through 2014, under the 2013 Credit
Agreement. At the time of the extension, we concluded that the value of the new guarantee was $3.9&nbsp;million. This amount was recorded as deferred financing costs and is being amortized through 2014. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">From December 2011 through June 2013, we issued convertible promissory notes totaling $12.3&nbsp;million to related parties. These notes
accrued interest at a rate of 8%&nbsp;per year. The purchasers of the convertible notes also </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">25 </P>


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received warrants to purchase common stock. The promissory notes, and accrued interest, were converted into preferred stock in December 2013. The warrant fair values were accounted for as a debt
discount and amortized over the stated term of the convertibles notes. We concluded that the warrants qualified as a derivative liability and the fair value of the warrants should be adjusted at each reporting period. The amortization of the debt
discount is recorded in amortization of deferred financing costs and debt discount and the change in the derivative liability is recorded in derivative fair value adjustment. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Income Tax (Expense) Benefit </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Income tax expense consists of U.S. federal and state income taxes. To date, we have not been required to pay U.S. federal income taxes because
of our current and accumulated net operating losses. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><B>Results of Operations </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The following table summarizes our results of operations for the three months ended March&nbsp;31, 2014 and 2013, together with the changes in those items in
dollars and percentage (dollars in thousands): </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="47%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="22" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Three Months Ended</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>March&nbsp;31, 2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>March&nbsp;31, 2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Period-to-Period<BR>Change</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000">Amount</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000">Percentage&nbsp;of<BR>Revenue</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000">Amount</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000">Percentage&nbsp;of<BR>Revenue</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000">Amount</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000">Percentage</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Total revenue</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">4,705</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">100.</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">4,795</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">100.</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(90</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-1.9</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cost of Revenue</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,960</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">84.2</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,148</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">86.5</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(188</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-4.5</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Gross Margin</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>745</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15.8</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>647</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">13.5</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>98</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15.1</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Operating expenses:</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research and development</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,320</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">28.1</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,154</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">24.1</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">166</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">14.4</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Selling, general and administrative</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,206</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">25.6</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,091</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">22.8</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">115</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10.5</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Gain on sale of asset</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">0.0</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(514</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-10.7</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">514</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-100.0</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total operating expenses</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,526</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">53.7</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,731</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">36.1</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">795</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">45.9</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Loss from operations</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>(1,781</B></TD>
<TD NOWRAP VALIGN="bottom"><B>)&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-37.9</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>(1,084</B></TD>
<TD NOWRAP VALIGN="bottom"><B>)&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-22.6</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>(697</B></TD>
<TD NOWRAP VALIGN="bottom"><B>)&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">64.3</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other income (expense):</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Amortization of deferred financing costs and debt discount</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(536</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-11.4</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(709</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-14.8</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">173</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-24.4</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Derivative fair value adjustment</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,783</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">59.1</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">0.0</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,783</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">*&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Interest expense</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(44</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-0.9</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(50</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-1.0</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-12.0</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Interest expense &#151; related party</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">0.0</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(226</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-4.7</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">226</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-100.0</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other expense</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(10</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-0.2</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">0.0</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(10</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">*&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total other income (expense):</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,193</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">46.6</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(985</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-20.5</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,178</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-322.6</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Net Income (Loss)</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>$</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>412</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8.8</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>$</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>(2,069</B></TD>
<TD NOWRAP VALIGN="bottom"><B>)&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-43.1</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>$</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>2,481</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">-119.9</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">*</TD>
<TD ALIGN="left" VALIGN="top"><I>Not applicable or meaningful</I> </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Revenue.</I> For the three months ended March&nbsp;31, 2014, revenue
of $4.7 million remained relatively consistent with revenue of $4.8 million for the three months ended March&nbsp;31, 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Cost of Revenue.</I> For
the three months ended March&nbsp;31, 2014, cost of revenue of $3.9 million remained relatively consistent with the $4.1 million of cost of revenues for the three months ended March&nbsp;31, 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Research and Development.</I> For the three months ended March&nbsp;31, 2014, research and development of $1.3 million was relatively consistent with the
$1.2 million for the three months ended March&nbsp;31, 2013. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">26 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Selling, General&nbsp;&amp; Administrative</I>. For the three months ended March&nbsp;31, 2014, selling,
general and administrative expenses of $1.2 million was largely unchanged from the $1.1 million for the three months ended March&nbsp;31, 2103. The increase of $0.1 million, or 10.5%, was primarily attributable to increase in compensation expense of
$0.1 million. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Gain/Loss on Sale of Assets</I>. For the three months ended March&nbsp;31, 2014, gain on sale of asset decreased to zero compared to
$0.5 million in the three months ended March&nbsp;31, 2013. The amount recorded during the first quarter of 2013 represents a partial payment on the sale of proprietary software. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Amortization of Deferred Financing Costs.</I> For the three months ended March&nbsp;31, 2014, amortization of deferred financing costs decreased to $0.5
million compared to $0.7 million in the three months ended March&nbsp;31, 2013. The decrease of $0.2 million, or 24.4%, was the result of an additional amount of amortization expense recorded during the three months ended March&nbsp;31, 2013. During
March&nbsp;2013, the 2010 Credit Agreement and related party guarantee were extended through 2014. At the time of the extension, the remaining unamortized balance of deferred financing costs of $0.2 million from the 2010 Credit Agreement was
immediately recognized as expense. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Derivative Fair Value Adjustment</I>. For the three months ended March&nbsp;31, 2014, derivative fair value
adjustment was a $2.8 million gain compared to $0 in the three months ended March&nbsp;31, 2013. The gain was due to the decrease in the estimated fair value of our common stock, from $47.74 per share as of December&nbsp;31, 2013 to $36.77 per share
as of March&nbsp;31, 2014. We estimate an additional gain of $7.2 million will be recognized for the three months ending June&nbsp;30, 2014 due to the further decrease in the estimated fair value of our common stock from $36.77 per share as of
March&nbsp;31, 2014, to the actual fair value of $10.00 per share on the IPO date of May&nbsp;2, 2014. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Interest Expense &#151; Related Party.</I> For
the three months ended March&nbsp;31, 2014, interest expense &#151; related party was zero compared to $0.2 million in the three months ended March&nbsp;31, 2013. As of March&nbsp;31, 2014 and 2013, the convertible promissory notes issued and
outstanding was $0 and $11.4 million, respectively. There was no interest expense &#151; related party recognized in the three months ended March&nbsp;31, 2014, since the outstanding principal and interest of all convertible promissory notes issued
to related parties were already converted into Series D Preferred stock in December 2013. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Liquidity and Capital Resources </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Sources of Liquidity </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Through March&nbsp;31, 2014, we have funded our operations through revenue from the provision of contract research and development services and
$79.8 million from debt and equity issuances. As of March&nbsp;31, 2014, we had cash and cash equivalents of approximately $0.6 million, compared to $1.4&nbsp;million as of December&nbsp;31, 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We have incurred losses since our inception. The net income reported as of March&nbsp;31, 2014 was due to the decrease in the fair value of
our common stock that affected the fair value of our derivative liability. As of March&nbsp;31, 2014, we have reported an accumulated deficit of $112.9&nbsp;million. We anticipate that we will continue to incur losses for at least the next several
years. We&nbsp;expect that our research and development and selling, general and administrative expenses will continue to increase and, as a result, we may need additional capital to fund our operations, which we may obtain through one or more of
equity offerings, debt financings, or other third-party funding, strategic alliances and licensing or collaboration arrangements. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In
April 2010, we entered into the 2010 Credit Agreement with HSBC Bank, which was comprised of a $5.0 million term loan and a $10.0 million revolving credit facility. Borrowings under this 2010 Credit Agreement carried interest at a rate of London
InterBank Offered Rate plus 0.95%&nbsp;per annum. The 2010 Credit Agreement required interest-only payments through March 2013 and all outstanding borrowings under the 2010 Credit Agreement were due on March&nbsp;11, 2013. The 2010 Credit Agreement
contained no financial covenants and was guaranteed by a related party that has an investment in our company. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">27 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In March&nbsp;8, 2013, we entered into an agreement to amend the 2010 Credit Agreement with HSBC
Bank (the &#147;2013 Credit Agreement&#148;). The 2013 Credit Agreement required interest-only payments through December&nbsp;31, 2014 and all outstanding borrowings were due on December&nbsp;31, 2014, while other significant terms of the 2010
Credit Agreement remained the same. The 2013 Credit Agreement was guaranteed by a related party that has an investment in our company. The full amounts of both the $5.0 million term loan and the $10.0 million revolving credit facility were
outstanding as of March&nbsp;31, 2014 and December&nbsp;31, 2013. The weighted-average interest rate was 1.2% and 1.4% for the three months ended March&nbsp;31, 2014 and 2013, respectively. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In December 2011, we issued convertible notes and warrants to related parties that hold direct investments in our company and received
proceeds of $5.5 million. The total principal amount of the convertible notes was $5.5 million and the convertible notes bore interest at a rate of 8%&nbsp;per annum. In January and May of 2012, we received $0.2&nbsp;million and $5.7&nbsp;million,
respectively, from the issuance of additional convertible notes and warrants under the same agreement. In June 2013 we issued convertible notes that bore interest at a rate of 8%&nbsp;per annum to related parties that hold direct investments in our
company and received proceeds of $0.9&nbsp;million. On December&nbsp;11, 2013, in connection with the stock purchase described in the next sentence, the total principal and interest then outstanding on the convertible notes amounting to $14.0
million were converted into Series D-1 and Series D-2 convertible preferred stock. In December 2013, we issued shares of our convertible preferred stock and warrants to purchase shares of our common stock to existing investors in our company and
received net proceeds of $2.4 million. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In January 2014, we issued shares of our convertible Series D-2 Preferred Stock and warrants to
purchase shares of our common stock to existing investors in our company and received net proceeds of $0.5 million. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On May&nbsp;7, 2014,
we completed our IPO of our common stock pursuant to a Registration Statement that was declared effective on May&nbsp;2, 2014. We sold 6,200,000 shares of our common stock at a price of $10.00 per share. As a result of the IPO, we raised a total of
$54.8 million in net proceeds after deducting underwriting discounts and commissions of $3.3 million and offering expenses of $3.9 million. Costs directly associated with our IPO were capitalized and recorded as deferred offering costs prior to the
completion of the IPO. These costs will be recorded as a reduction of the proceeds received in arriving at the amount to be recorded in additional paid-in capital. Upon completion of the IPO, all outstanding shares of our preferred stock were
converted into 1,691,884 shares of our common stock. In addition, we issued 275,687 shares of common stock in relation to the warrants to purchase our common stock that were exercised. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On May&nbsp;7, 2014, $15.0 million of the proceeds from the IPO, which was invested by the related party who guaranteed the 2013 Credit
Agreement, was used to pay in full the outstanding borrowings under the 2013 Credit Agreement, and thereby releasing the related party guarantor from all obligations in relation to the 2013 Credit Agreement. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Cash Flows </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The following table sets
forth the significant sources and uses of cash for the three months ended March&nbsp;31, 2014 and 2013: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="63%"></TD>
<TD VALIGN="bottom" WIDTH="15%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="14%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>For&nbsp;the&nbsp;Three&nbsp;Month&nbsp;Ended&nbsp;March&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;2014&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;2013&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><B>(unaudited; dollars&nbsp;in&nbsp;thousands)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net cash provided by (used in) operating activities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">161</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(1,851</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net cash (used in) provided by investing activities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(74</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">248</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net cash used in financing activities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(839</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net decrease in cash and cash equivalents</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>$</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>(752</B></TD>
<TD NOWRAP VALIGN="bottom"><B>)&nbsp;</B></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><B>$</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>(1,603</B></TD>
<TD NOWRAP VALIGN="bottom"><B>)&nbsp;</B></TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">28 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Operating Activities: </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Net cash provided by operating activities of $0.2 million for the three months ended March&nbsp;31, 2014, primarily consisted of the receipt on
an upfront payment from a partner of $0.5 million, an advance payment for second quarter 2014 work of $0.6 million and an increase in accounts payable and accrued expenses of $0.6 million, largely offset by the operating loss that would have
resulted but for the $2.8 million change in derivative liability incurred during the quarter. Net cash used in operating activities of $1.9 million for the three months ended March&nbsp;31, 2013, primarily consisted of a $2.1 million operating loss,
offset in part by non-cash charges for depreciation and amortization of $1.1 million but increased by a gain on sale of asset of $0.5 million, and an increase in accounts receivable and unbilled receivables of $0.2 million, and prepaid expenses of
$0.1 million and a decrease in accounts payable and accrued expenses of $0.2 million. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Investing Activities </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Net cash used in investing activities for the three months ended March&nbsp;31, 2014 was for the purchase of property and equipment. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Net cash provided by investing activities of $0.2 million for the three months ended March&nbsp;31, 2013 primarily consisted of the proceeds
from the sale of internally developed research software of $0.5 million, net of transaction expenses, partially offset by the purchase of property and equipment in the amount of $0.3 million. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Financing Activities </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Net
cash used in financing activities for the three months ended March&nbsp;31, 2014 consisted of $1.4 million of payments for deferred offering costs, which was partially offset by $0.5 million in proceeds raised from the issuance of series D-2
Preferred Shares. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">There were no financing activities affecting cash flows for the three months ended March&nbsp;31, 2013. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><I>Future Funding Requirements </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">To date, we have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We
do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize SCY-078. We do not expect our contract research and development services to support our funding needs associated
with the development of SCY-078. In addition, we expect our expenses to increase in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for,
product candidates. We anticipate that we will need substantial additional funding in connection with our continuing operations. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Based
upon our current operating plan, we believe that the net proceeds from our IPO, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements through at least the first half
of 2016. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and
commercialization of product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures necessary to complete the development of product candidates. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Our future capital requirements will depend on many factors, including: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the progress, costs, and the clinical development of SCY-078; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the ability of product candidates to progress through clinical development successfully; </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">29 </P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">our need to expand our research and development activities; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the costs associated with our continuing to support our ability to provide contract research and development services; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the costs associated with securing, establishing and maintaining commercialization and manufacturing capabilities; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the
licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">our need and ability to hire additional management and scientific and medical personnel; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">our need to implement additional internal systems and infrastructure, including financial and reporting systems; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the economic and other terms, timing and success of our existing licensing arrangements and any collaboration, licensing or other arrangements into which we may enter in the future. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Until such time, if ever, as we can generate substantial revenue from product sales, we expect to finance our cash needs through a combination
of equity offerings, debt financings, or other third-party funding, cash generated from the provision of contract research and development services, marketing and distribution arrangements, or other collaborations, strategic alliances or licensing
arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common stockholders will be diluted, and the terms of these securities may include liquidation or
other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional
debt, making capital expenditures or declaring dividends. If we raise additional funds through other third-party funding, marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third
parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Contractual Obligations, Commitments and Contingencies </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">There have been no material changes in our contractual obligations, commitments or contingencies since December&nbsp;31, 2014, except that the
$15 million bank facility was repaid on May&nbsp;7, 2014. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Off-Balance Sheet Arrangements </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Critical Accounting Policies and Significant Judgments and Estimates </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Our management&#146;s discussion and analysis of our financial condition and results of operations is based on our financial statements, which
we have prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, as well as the reported revenues and expenses during the reported periods. We evaluate these estimates and judgments on an ongoing basis. We
base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">30 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Our critical accounting policies have not changed materially from those described in our
Registration Statement under the Securities Act of 1933, as amended, filed with the Securities and Exchange Commission on April&nbsp;30, 2014. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%" VALIGN="top" ALIGN="left"><B><A NAME="toc722469_7"></A>Item&nbsp;3.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Quantitative and Qualitative Disclosure about Market Risk </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><I>Interest Rate Sensitivity
</I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Our cash and cash equivalents as of March&nbsp;31, 2014 consisted of cash maintained in several FDIC insured operating accounts. Our
primary exposure to market risk for our cash and cash equivalents is interest income sensitivity, which is affected by changes in the general level of U.S interest rates. However, we do not believe a sudden change in the interest rates would have a
material impact on our financial condition or results of operations. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">During the quarter ended March&nbsp;31, 2014, we were subject to
interest rate risk in connection with borrowing under our 2013 Credit Agreement, which comprised a $5.0 million term loan and a $10.0 million revolving credit facility. Borrowings under the 2013 Credit Agreement carried interest at a rate of LIBOR
plus 0.95%&nbsp;per annum. Any borrowings under the 2013 Credit Agreement were at a variable rate and, as a result, increases in market interest rates would generally result in increased interest expense on our outstanding borrowings. As of
March&nbsp;31, 2014, we had $15.0 million outstanding under the 2013 Credit Agreement. As a result, each change of one percentage point in interest rates resulted in an approximate $0.2 million change in our annual interest expense on our
outstanding borrowings. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%" VALIGN="top" ALIGN="left"><B><A NAME="toc722469_8"></A>Item&nbsp;4.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Controls and Procedures </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><I>Management&#146;s Evaluation of our Disclosure Controls and
Procedures </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the
reports that we file or submit under the Securities Exchange Act of 1934 is (1)&nbsp;recorded, processed, summarized, and reported within the time periods specified in the SEC&#146;s rules and forms and (2)&nbsp;accumulated and communicated to our
management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As of March&nbsp;31, 2014, our management, with the participation of our principal executive officer and principal financial officer,
evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Our management recognizes that any controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and
principal financial officer have concluded based upon the evaluation described above that, as of March&nbsp;31, 2014, our disclosure controls and procedures were effective at the reasonable assurance level. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><I>Changes in Internal Control Over Financial Reporting </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">During the quarter ended March&nbsp;31, 2014, there have been no changes in our internal control over financial reporting, as such term is
defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">31 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc722469_8a"></A>PART&nbsp;II. OTHER INFORMATION </B></P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><B><A NAME="toc722469_9"></A>Item&nbsp;1A.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Risk Factors </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>In evaluating our business, you should carefully consider the following risks, as well
as the other information contained in this Quarterly Report on Form&nbsp;10-Q. These risk factors could cause our actual results to differ materially from those contained in forward-looking statements we have made in this Quarterly Report on
Form&nbsp;10-Q and those we may make from time to time. If any of the following risks actually occurs, our business, financial condition and operating results could be harmed. The risks and uncertainties described below are not the only ones facing
us. Additional risks and uncertainties not presently known to us, or that we currently see as immaterial, may also harm our business. The risks facing our business have not changed substantively from those discussed in our Registration Statement on
Form S-1/A as filed with the SEC on April&nbsp;30, 2014, except for those risk factors below designated by an asterisk (*). </I></P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Risks
Relating to Our Financial Condition and Need for Additional Capital </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We have never been profitable, we have no products approved for commercial
sale, and to date we have not generated any revenue from product sales. As a result, our ability to curtail our losses and reach profitability is unproven, and we may never achieve or sustain profitability.* </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We are not profitable and do not expect to be profitable in the foreseeable future. We have incurred net losses in each year since our
inception, including net losses of approximately $30.5&nbsp;million for the year ended December&nbsp;31, 2013. We had net income of $0.4 million for the three months ended March&nbsp;31, 2014, primarily due to a derivative fair value adjustment, and
expect to incur a net loss for the year ended December&nbsp;31, 2014. As of March&nbsp;31, 2014, we had an accumulated deficit of approximately $113&nbsp;million. Although we have generated revenues through our contract research and development
services, these revenues have not been sufficient to support our business, and so in addition we have financed our operations through the sale of convertible preferred stock and convertible debt. We intend to devote a majority of our financial
resources to the development of SCY-078, our lead product candidate. We have not generated any revenue from product sales. The report of our independent registered public accounting firm on our financial statements for the year ended
December&nbsp;31, 2013 as filed with our registration statement on Form S-1/A on April&nbsp;30, 2014, includes an explanatory paragraph relating to our ability to continue as a going concern. We have suffered substantial losses from operations and
require additional financing. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We expect to continue to incur significant expenses and increasing operating losses for the foreseeable
future. The net losses we incur may fluctuate significantly from quarter to quarter. We anticipate that our expenses will increase substantially as we: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">continue the development of SCY-078; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">initiate clinical trials for SCY-078; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">seek marketing approvals for SCY-078; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">maintain, expand and protect our intellectual property portfolio; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">hire additional clinical, quality control and scientific personnel; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">create additional infrastructure to support our operations as a public company. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition,
our expenses could increase if we are required by the U.S. Food and Drug Administration, or the FDA, to perform studies in addition to, or that are larger than, those that we currently expect. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As a result of the foregoing, we expect to experience net losses and negative cash flows for the foreseeable future, and we are unable to
predict when, or if, we will be able to achieve profitability. Our losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders&#146; equity, financial position and working capital. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">32 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We expect a number of factors to cause our operating results to fluctuate on a quarterly and annual basis,
which may make it difficult to predict our future performance. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Our financial condition and operating results have varied significantly
in the past and will continue to fluctuate from quarter to quarter or year to year due to a variety of factors, many of which are beyond our control. The following factors relating to our business, as well as factors described elsewhere in this
quarterly report, may contribute to these fluctuations: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the costs associated with developing SCY-078, which are difficult for us to predict; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">any delays in regulatory review and approval of SCY-078; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">delays in the timing of filing of a new drug application, or NDA, as well as commencement, enrollment and the timing of clinical testing, of SCY-078 or any other product candidates we may seek to develop;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">our ability to commercialize product candidates, both in the United States and overseas, if we are able to obtain regulatory approval to do so; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the costs associated with obtaining and maintaining regulatory approval and ongoing company compliance and product compliance for SCY-078; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the success of our providing contract research and development services; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">market acceptance of SCY-078 and any future product candidates we may seek to develop; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">changes in regulations and regulatory policies; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">competition from existing products or new products that may emerge; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the ability of patients or healthcare providers to obtain coverage of, or sufficient reimbursement for, any products we are able to develop; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">our ability to establish or maintain collaborations, licensing or other arrangements; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">costs related to, and outcomes of, potential litigation; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">potential product liability claims; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">potential liabilities associated with hazardous materials. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Due to the various factors
mentioned above, and others, the results of any quarterly or annual periods should not be relied upon as indications of future operating performance. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We may continue to require substantial additional capital, and if we are unable to raise capital when needed we would be forced to delay, reduce or
eliminate our development program for SCY-078.* </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Developing pharmaceutical products, including conducting preclinical studies and
clinical trials, is expensive. If the FDA requires that we perform additional studies beyond those that we currently expect, our expenses could increase beyond what we currently anticipate and the timing of any potential product approval may be
delayed. In May 2014, we raised net proceeds of approximately $54.8 in connection with our IPO after deducting underwriting discounts and commissions of approximately $3.3 million and offering expenses payable by us of approximately $3.9 million. In
addition, we paid off $15 million and all accrued interest on our credit facility with HSBC Bank on May&nbsp;7, 2014. We believe that the net proceeds from our IPO will be sufficient to meet our anticipated operating requirements through
March&nbsp;31, 2016; provided, however, that changing circumstances may cause us to consume capital more rapidly than we currently anticipate. We may need to raise additional funds from the issuance of equity and/or debt securities or otherwise
obtain funding through strategic alliances or collaborations with third parties. In any event, we will require additional capital to complete development of, to seek regulatory approval for and, if approval is obtained, to commercialize SCY-078 and
any future product candidates we may seek to develop. Raising funds in the current economic environment, when the capital markets have been affected by the global recession, may present additional challenges. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">33 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If we are required to secure additional financing, the additional fundraising efforts may divert
our management from our day-to-day activities, which may adversely affect our ability to develop and commercialize SCY-078 and any future product candidates we may seek to develop. In addition, we cannot guarantee that financing will be available in
sufficient amounts or on terms acceptable to us, if at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">significantly delay, scale back or discontinue the development or commercialization of SCY-078 and any future product candidates we may seek to develop; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">seek strategic alliances for research and development programs at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; or </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">relinquish or license on unfavorable terms our rights to any product candidates that we otherwise would seek to develop or commercialize ourselves. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If we are required to conduct additional fundraising activities and we are unable to raise additional capital in sufficient amounts or on
terms acceptable to us, we will be prevented from pursuing development and commercialization efforts, which will have a material adverse effect on our business, operating results and prospects. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Risks Relating to the Development, Regulatory Approval and Commercialization </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>of Our Product Candidates For Human Use </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Historically we have been primarily a contract research and development services company devoting a majority of our resources and efforts to providing
research and development services to other companies, and we are only now shifting our focus to developing our own drug candidate SCY-078. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We were spun out from Aventis S.A., or Aventis, in 2000 as a chemistry and animal health services company, providing contract research services
to third parties. Since then, we have derived substantially all of our revenue from providing these services to human and animal health companies to assist them in developing their own drug candidates.&nbsp;In the course of providing these services,
we have leveraged the expertise to develop our own proprietary compounds, including a platform of cyclophilin inhibitors, among them SCY-635.&nbsp;In 2013, under our contract with Merck Sharp&nbsp;&amp; Dohme Corp., or Merck, a subsidiary of
Merck&nbsp;&amp; Co., Inc., Merck exclusively licensed SCY-078 to us in the field of human health and in conjunction with that license transferred to us the investigational new drug application pending with the FDA and related regulatory
responsibilities, as well as all data Merck had developed for the compound, plus active pharmaceutical ingredients and tablets. In 2014, Merck assigned the patents to us related to SCY-078 that it had exclusively licensed to us. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Although we have conducted Phase 1 and Phase 2 studies of SCY-635, our cyclophilin inhibitor, we only acquired the rights to develop SCY-078,
our lead drug candidate for the treatment of invasive fungal infections, in May 2013. We do not have a significant history of developing our own drug candidates, and we have not brought any drug candidates to market, which makes it difficult to
assess our ability to develop and commercialize SCY-078 and any future product candidates we may seek to develop or commercialize. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We cannot be
certain that SCY-078 will receive regulatory approval, and without regulatory approval we will not be able to market SCY-078. Regulatory approval is a lengthy, expensive and uncertain process. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Our ability to generate significant revenue related to SCY-078 sales will depend on the successful development and regulatory approval of
SCY-078. We expect that the earliest that we could obtain regulatory approval of SCY-078 and commence commercialization of SCY-078 will be several years from now, if at all. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We currently have no products approved for sale and we cannot guarantee that we will ever have marketable products. The development and
commercialization of a product candidate, including preclinical and clinical testing, manufacturing, quality systems, labeling, approval, record-keeping, selling, promotion, marketing and </P>
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distribution of products, is subject to extensive regulation by the FDA in the United States and regulatory authorities in other countries, with regulations differing from country to country. We
are not permitted to market product candidates in the United States until and unless we receive approval of an NDA from the FDA. We have not submitted an NDA for SCY-078. Obtaining approval of an NDA is a lengthy, expensive and uncertain process. An
NDA must include extensive preclinical and clinical data and supporting information to establish the product candidate&#146;s safety and effectiveness for each indication. The approval application must also include significant information regarding
the chemistry, manufacturing and controls for the product. The regulatory development and review process typically takes years to complete, involves numerous uncertainties and the potential for concerns to emerge late in the development process, and
approval is never guaranteed. Even if a product is approved, the FDA may limit the indications for which the product may be used, include extensive warnings on the product labeling or require costly ongoing requirements for post-marketing clinical
studies and surveillance or other risk management measures to monitor the safety or efficacy of the product candidate. Markets outside of the United States also have requirements for approval of drug candidates with which we must comply prior to
marketing. Obtaining regulatory approval for marketing of a product candidate in one country does not ensure we will be able to obtain regulatory approval in other countries, but a failure or delay in obtaining regulatory approval in one country may
have a negative effect on the regulatory process in other countries. Also, any regulatory approval of a product candidate, once obtained, may be withdrawn. If SCY-078 or any of our other wholly-owned or partnered product candidates do not receive
regulatory approval, we may not be able to generate sufficient revenue to become profitable or to continue our operations. Moreover, the filing of our NDA or the receipt of regulatory approval does not assure commercial success of any approved
product. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Although the oral form of SCY-078 has been granted Qualified Infectious Disease Product status, this does not guarantee that the length of
the FDA review process will be significantly shorter than otherwise, or that SCY-078 will ultimately be approved by the FDA. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We
applied to the FDA for, and received, the designation of the oral form of SCY-078 as a Qualified Infectious Disease Product, or QIDP, under the Generating Antibiotic Incentive Now Act, or GAIN Act. We will be submitting an additional application to
have the IV form of SCY-078 designated as a QIDP. There is no guarantee that the IV form of SCY-078 will be granted QIDP status. We anticipate that the QIDP designation will provide, among other benefits, an overall increased level of communication
with the FDA during the development process as a fast track product, priority review once a NDA is submitted, and, if SCY-078 is approved for its proposed use and awarded five years of exclusivity as a new chemical entity, or NCE, SCY-078 will be
eligible for a ten year period of data exclusivity, comprising five years of NCE exclusivity plus an additional five years as a designated QIDP. This exclusivity period should protect SCY-078 from being referenced in an abbreviated new drug
application, or ANDA, in support of a generic drug, or a 505(b)(2) new drug application for a follow-on product until the expiration of the exclusivity period (which may be shortened by one year if an ANDA or 505(b)(2) applicant seeks to challenge
any of the patents that claim SCY-078). However, the primary framework of the GAIN Act became effective July&nbsp;9, 2012, and as a relatively new law there is limited precedent for the way in which it will be implemented. Receipt of QIDP
designation in practice may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA or related exclusivity benefits.
</P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Delays in the commencement, enrollment and completion of clinical trials could result in increased costs to us and delay or limit our ability to
obtain regulatory approval for SCY-078 or any future product candidates. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We do not know whether clinical trials of SCY-078 or any
future product candidates we may seek to develop will be allowed to commence or, if commenced, will be completed on schedule or at all. The commencement, enrollment and completion of clinical trials can be delayed for a variety of reasons,
including: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">inability to reach agreements on acceptable terms with prospective clinical research organizations, or CROs, and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among
different CROs and trial sites; </TD></TR></TABLE>
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<TD ALIGN="left" VALIGN="top">difficulty identifying and engaging qualified clinical investigators; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">regulatory objections to commencing a clinical trial or proceeding to the next phase of investigation, including inability to reach agreement with the FDA or non-U.S. regulators regarding the scope or design of our
clinical trials or for other reasons such as safety concerns that might be identified during preclinical development or early stage clinical trials; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">inability to identify and maintain a sufficient number of trial sites, many of which may already be engaged in other clinical trial programs, including some that may be for the same indication as our product candidates;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">withdrawal of clinical trial sites from our clinical trials as a result of changing standards of care or the ineligibility of a site to participate in our clinical trials; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">inability to obtain institutional review board approval to conduct a clinical trial at prospective sites; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">difficulty recruiting and enrolling patients to participate in clinical trials for a variety of reasons, including meeting the enrollment criteria for our study and competition from other clinical trial programs for the
same indication as product candidates we seek to commercialize; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">inability to retain patients in clinical trials due to the treatment protocol, personal issues, side effects from the therapy or lack of efficacy, particularly for those patients receiving a placebo; and
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">inability to obtain sufficient funding to commence a clinical trial. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition, a clinical
trial may be suspended or terminated by us, our current or any future partners, the FDA or other regulatory authorities due to a number of factors, including: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">failure by us, CROs or clinical investigators to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">failed inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">unforeseen safety or efficacy issues or any determination that a clinical trial presents unacceptable health risks; or </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">lack of adequate funding to continue the clinical trial due to unforeseen costs resulting from enrollment delays, requirements to conduct additional trials and studies, increased expenses associated with the services of
our CROs and other third parties, or other reasons. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If we are required to conduct additional clinical trials or other
testing of SCY-078 or any future product candidates we may seek to develop, we may be delayed in obtaining, or may not be able to obtain, marketing approval for these product candidates. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition, if our current or any future partners have rights to and responsibility for development of SCY-078 or any future product
candidates, they may fail to meet their obligations to develop and commercialize the product candidates, including clinical trials for these product candidates. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Changes in regulatory requirements and guidance may occur and we or any of our partners may be required by appropriate regulatory authorities
to amend clinical trial protocols to reflect these changes. Amendments may require us or any of our partners to resubmit clinical trial protocols to independent review boards for re-examination, which may impact the costs, timing or successful
completion of a clinical trial. If we or any of our partners experience delays in the completion of, or if we or our partners terminate, clinical trials, the commercial prospects for SCY-078 and any future product candidates we may seek to develop
will be harmed, and our ability to generate revenue from sales of these product candidates will be prevented or delayed. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also
ultimately lead to the denial of regulatory approval of a product candidate. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Clinical failure can occur at any stage of clinical development. Because the results of earlier clinical
trials are not necessarily predictive of future results, any product candidate we or our current or potential future partners advance through clinical trials may not have favorable results in later clinical trials or receive regulatory approval.
</B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Clinical failure can occur at any stage of our clinical development. Clinical trials may produce negative or inconclusive results, and
we or our partners may decide, or regulators may require us, to conduct additional clinical or preclinical testing. In addition, data obtained from tests are susceptible to varying interpretations, and regulators may not interpret data as favorably
as we do, which may delay, limit or prevent regulatory approval. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will generate the same results or otherwise provide adequate data to demonstrate the
efficacy and safety of a product candidate. Frequently, product candidates that have shown promising results in early clinical trials have subsequently suffered significant setbacks in later clinical trials. In addition, the design of a clinical
trial can determine whether its results will support approval of a product application, or approval of a supplemental application to add a new indication or other changes and flaws or shortcomings in the design of a clinical trial may not become
apparent until the clinical trial is well advanced. We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support regulatory approval, or approval of supplemental applications for new
indications or other changes. Further, clinical trials of potential products often reveal that it is not practical or feasible to continue development efforts. If SCY-078 or any future product candidates are found to be unsafe or lack efficacy, we
or our collaborators will not be able to obtain regulatory approval for them and our business would be harmed. For example, if the results of our planned Phase&nbsp;2 and Phase&nbsp;3 clinical trials of SCY-078 do not achieve, to the satisfaction of
regulators, the primary efficacy endpoints and demonstrate an acceptable level of safety, the prospects for approval of SCY-078 would be materially and adversely affected. A number of companies in the pharmaceutical industry, including those with
greater resources and experience than us, have suffered significant setbacks in Phase 2 and Phase&nbsp;3 clinical trials, even after seeing promising results in earlier clinical trials. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In some instances, there can be significant variability in safety and/or efficacy results between different trials of the same product
candidate due to numerous factors, including differences in trial protocols and design, differences in size and type of the patient populations, adherence to the dosing regimen and the rate of dropout among clinical trial participants. Further, the
patients taking SCY-078 often have other significant medical issues, such as organ transplants, cancer or other conditions in which their immune systems are depressed, which makes it difficult to measure the effect of SCY-078 in the presence of
these medical issues. We do not know whether any Phase&nbsp;2, Phase&nbsp;3 or other clinical trials we or any partners may conduct will demonstrate consistent and/or adequate efficacy and safety to obtain regulatory approval to market SCY-078 and
any future product candidates we may seek to develop. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We have limited experience in conducting Phase 2 and Phase&nbsp;3 clinical trials and have never
submitted an NDA before, and we may be unable to do so for SCY-078 or any future product candidate we may seek to develop. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Merck
completed seven Phase 1 clinical trials of SCY-078, and we are planning to conduct Phase 2 and Phase 3 clinical trials of SCY-078. The conduct of successful Phase 2 and Phase 3 clinical trials is essential in obtaining regulatory approval, and the
submission of a successful NDA is a complicated process. We have limited experience in preparing and submitting regulatory filings, have previously only sponsored one Phase 2 clinical trial, and have not previously sponsored any Phase 3 clinical
trials nor have we ever submitted an NDA before. Consequently, we may be unable to successfully and efficiently execute and complete these planned clinical trials in a way that is acceptable to the FDA and leads to an NDA submission, acceptance and
approval of SCY-078 or any future product candidate we may seek to develop. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of product candidates that we may seek to
develop. In addition, failure to commence or complete, or delays in, our planned clinical trials would prevent us from or delay us in commercializing SCY-078 or any future product candidate we may develop. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We have not yet finalized the protocol for our planned Phase&nbsp;2 study or studies of SCY-078, and are still
in discussions with the FDA regarding anticipated indications and study endpoints. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Following the transfer by Merck to us of ownership
and responsibility for the clinical development and NDA related to SCY-078, we assessed the regulatory history and initiated discussions with the FDA to obtain clarity on several open questions regarding the clinical development plan for SCY-078.
Our most recent meeting with the FDA was June&nbsp;2, 2014, and while we obtained feedback at this meeting, there are still some open questions under consideration by the FDA and our Phase 2 protocol is still being finalized. We do not know when, if
at all, we will be able to finalize the protocol. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The environment in which our regulatory submissions may be reviewed changes over time, which may
make it more difficult to obtain regulatory approval of any of our product candidates we may seek to develop or commercialize. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The
environment in which our regulatory submissions are reviewed changes over time. For example, average review times at the FDA for NDAs have fluctuated over the last ten years, and we cannot predict the review time for any submission with any
regulatory authorities. Review times can be affected by a variety of factors, including budget and funding levels and statutory, regulatory and policy changes. Moreover, in light of widely publicized events concerning the safety risk of certain drug
products, regulatory authorities, members of Congress, the Government Accountability Office, medical professionals and the general public have raised concerns about potential drug safety issues. These events have resulted in the withdrawal of drug
products, revisions to drug labeling that further limit use of the drug products and establishment of risk evaluation and mitigation strategies that may, for instance, restrict distribution of drug products. The increased attention to drug safety
issues may result in a more cautious approach by the FDA to clinical trials. Data from preclinical studies and clinical trials may receive greater scrutiny with respect to safety, which may make the FDA or other regulatory authorities more likely to
terminate clinical trials before completion, or require longer or additional clinical trials that may result in substantial additional expense, a delay or failure in obtaining approval or approval for a more limited indication than originally
sought. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition, data obtained from preclinical studies and clinical trials are subject to different interpretations, which could
delay, limit or prevent regulatory review or approval of product candidates. Changes in FDA personnel responsible for review of our submissions could also impact the manner in which our data are viewed. Furthermore, regulatory attitudes towards the
data and results required to demonstrate safety and efficacy can change over time and can be affected by many factors, such as the emergence of new information, including on other products, policy changes and agency funding, staffing and leadership.
We do not know whether future changes to the regulatory environment will be favorable or unfavorable to our business prospects. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>If SCY-078 or any
other future product candidates for which we receive regulatory approval do not achieve broad market acceptance, the revenue that is generated from their sales will be limited. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The commercial success of SCY-078 or any other product candidates we may seek to develop will depend upon the acceptance of these products
candidates among physicians, patients, the medical community and healthcare payors. The degree of market acceptance of product candidates will depend on a number of factors, including: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">limitations or warnings contained in the FDA-approved labeling; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">changes in the standard of care for the targeted indications; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">limitations in the approved indications; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">availability of alternative therapies with potentially advantageous results, or other products with similar results at similar or lower cost, including generics and over-the-counter products; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">lower demonstrated clinical safety or efficacy compared to other products; </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">38 </P>


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<TD ALIGN="left" VALIGN="top">occurrence of significant adverse side effects; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">ineffective sales, marketing and distribution support; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">lack of availability of reimbursement from managed care plans and other third-party payors; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">timing of market introduction and perceived effectiveness of competitive products; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">lack of cost-effectiveness; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">adverse publicity about our product candidates or favorable publicity about competitive products; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">lack of convenience and ease of administration; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">potential product liability claims. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If SCY-078 or any future product candidates we may seek
to develop are approved, but do not achieve an adequate level of acceptance by physicians, healthcare payors and patients, sufficient revenue may not be generated from these product candidates, and we may not become or remain profitable. In
addition, efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>A significant use of anti-fungal drugs is treatment due to the presence of symptoms before diagnosis of the invasive fungal infections, and if a diagnostic
tool is developed for the quick&nbsp;diagnosis of invasive fungal infections, the number of treatments using anti-fungal drugs may decrease significantly, decreasing the potential market for SCY-078. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We believe that a large portion of the treatments using anti-fungal drugs are administered when symptoms of invasive fungal infections are
present but a diagnosis of the infection has not yet been made, due to the quick and potentially fatal progression of invasive fungal infections.&nbsp;If a diagnostic tool is developed for the quick&nbsp;diagnosis of invasive fungal infections, then
the need to treat in advance of diagnosis of invasive fungal infections may be significantly diminished, which will reduce the potential market for SCY-078 in the event that we are able to obtain FDA approval of SCY-078. Moreover, if a fast and
accurate test of the susceptibility of a fungal infection to generically available treatments is developed and widely adopted, the market for SCY-078 may suffer. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>If invasive fungi develop resistance to SCY-078, our business will be harmed. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">One or more strains of invasive fungi may develop resistance to SCY-078, either because our hypothesis of the mechanism of action is incorrect
or because a strain of fungi undergoes some unforeseen genetic mutation that permits it to survive. Since we expect lack of resistance to be a major factor in the commercialization of SCY-078, the development of such resistance would have a major
adverse impact on the acceptability and sales of SCY-078. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>If we are unable to develop a formulation of SCY-078 that is delivered by intravenous, or
IV, therapy SCY-078 may not achieve broad market acceptance and sales will be limited. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Current invasive fungal infection treatment
regimens typically involve initial administration of treatments as an IV infusion, with a step down to an oral formulation of the same or a similar medication to complete the course of treatment on an out-patient basis. We believe that providing
both the IV and oral formulations will be beneficial to doctors who prefer to start treatment of patients in a hospital setting with an IV therapy and then switch them to an oral formulation of the same medication. We currently have an oral form of
SCY-078, and intend to develop an IV formulation. If we are unable to successfully develop and achieve regulatory approval for our IV formulation of SCY-078, or are delayed in developing and obtaining regulatory approval for our IV formulation of
SCY-078, our lead product candidate may not achieve, or may be delayed in achieving, broad market acceptance and sales will be limited. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">39 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Our product candidates may have undesirable side effects that may delay or prevent marketing approval, or, if
approval is received, require them to be taken off the market or otherwise limit their sales. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">It is impossible to predict when or if
SCY-078 or any other product candidate we may seek to develop will prove effective or safe or will receive marketing approval. Unforeseen side effects from any product candidates could arise either during clinical development or, if approved, after
the product has been marketed. For example, the most frequently noted adverse effects reported as associated with SCY-078 treatment in the seven Phase 1 studies of SCY-078 conducted to date were diarrhea, abdominal pain, headache, nausea, fatigue,
increased orthostatic heart rate, abnormal GI sounds, vomiting and dizziness. To date there have been two serious adverse events reported in clinical trials of SCY-078: one subject was diagnosed with a metastatic carcinoid tumor which was not
considered to be related to SCY-078 by the investigator; and one subject experienced significant liver function test increases which were considered to be related to SCY-078. Preclinical findings in the future could trigger the need to evaluate or
monitor for specific potential safety concerns in clinical trials. The results of future clinical trials may show that SCY-078 and any future product candidates we may seek to develop cause undesirable or unacceptable side effects, which could
interrupt, delay or halt clinical trials, resulting in delay of, or failure to obtain, marketing approval from the FDA and other regulatory authorities, or may lead us to abandon their development altogether. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Even if SCY-078 or any future product candidate we may seek to develop receives marketing approval, we or others may subsequently identify
undesirable or unacceptable side effects caused by these products, in which case: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">regulatory authorities may require the addition of labeling statements, specific warnings, precautions, contraindications or field alerts to physicians and pharmacies; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of the product; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">we may have limitations on how we promote the product; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">sales of the product may decrease significantly; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">regulatory authorities may require us to take our approved product off the market; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">we may be subject to litigation or product liability claims; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">our reputation may suffer. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Any of these events could prevent us or our current or potential
future partners from achieving or maintaining market acceptance of the affected product or could substantially increase commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenue from the sale
of products. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We have never marketed a drug before, and if we are unable to establish an effective sales force and marketing infrastructure or enter
into acceptable third-party sales and marketing or licensing arrangements, we may not be able to successfully commercialize SCY-078 and any future product candidates we may seek to develop. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We currently do not have any sales, distribution and marketing capabilities, the development of which will require substantial resources and
will be time consuming. The costs incurred in the development of these capabilities, either internally or through a third-party contract sales organization, would be incurred in advance of any approval of a product candidate. In addition, we may not
be able to hire a sales force in the United States that is sufficient in size or has adequate expertise in the medical markets that we intend to target. If we are unable to establish our sales force and marketing capability, our operating results
may be adversely affected. In addition, we plan to enter into sales and marketing or licensing arrangements with third parties for international sales of any approved products. If we are unable to enter into or maintain any such arrangements on
acceptable terms, or at all, we may be unable to market and sell SCY-078 or any future product candidates we may seek to develop in these markets. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">40 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We expect that SCY-078 and any future product candidates we may seek to develop will face competition, and
most of our competitors have significantly greater resources than we do. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The pharmaceutical industry is highly competitive, with a
number of established, large pharmaceutical companies, as well as many smaller companies. There are many foreign and domestic pharmaceutical companies, biotechnology companies, public and private universities, government agencies and research
organizations actively engaged in research and development of products that may target the same markets as SCY-078 and any future product candidates we may seek to develop. We expect any products we develop to compete on the basis of, among other
things, product efficacy, price, lack of significant adverse side effects and convenience and ease of treatment. For example, SCY-078 will compete against current leading anti-fungal drugs, including voriconazole from the azole class, caspofungin
from the echinocandin class, and liposomal amphotericin B from the polyenes class, many of which are currently available in generic form, or expected to be available in generic form at the time SCY-078 might be approved. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Compared to us, many of our competitors in the anti-fungal market have, and potential competitors for any future product candidates we may
seek to develop may have, substantially greater: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">resources, including capital, personnel and technology; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">research and development capability; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">clinical trial expertise; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">regulatory expertise; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">intellectual property portfolios; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">expertise in prosecution of intellectual property rights; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">manufacturing and distribution expertise; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">sales and marketing expertise. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As a result of these factors, our competitors and potential
competitors may obtain regulatory approval of their products more rapidly than we do. Our competitors and potential competitors may also develop drugs that are more effective, more widely used and less costly than ours and may also be more
successful than us in manufacturing and marketing their products and maintaining compliance with ongoing regulatory compliance. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Reimbursement
decisions by third-party payors may have an adverse effect on pricing and market acceptance in the United States. If there is not sufficient reimbursement for our products, it is less likely that our products will be purchased by patients and/or
providers. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Successful commercialization of pharmaceutical products usually depends on the availability of adequate coverage and
reimbursement from third-party payors, including commercial insurers and, under certain circumstances, federal and state healthcare programs. Patients and/or healthcare providers who purchase drugs generally rely on third-party payors to reimburse
all or part of the costs associated with such products. As such, adequate coverage and reimbursement from third-party payors can be essential to new product acceptance and may have an effect on pricing. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Because SCY-078 is not currently commercially available, we do not know the extent to which it will be reimbursed if it is approved by the
FDA. If we choose to bring other product candidates to market, they will be subject to similar uncertainty. We believe that SCY-078 and any other product candidates that are brought to market are less likely to be purchased by patients and/or
providers if they are not adequately reimbursed by third-party payors. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Furthermore, the market for our product candidates may depend on
access to third-party payors&#146; drug formularies, or lists of medications for which third-party payors provide coverage and reimbursement. Industry </P>
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competition to be included in such formularies results in downward pricing pressures on pharmaceutical companies. Third-party payors may refuse to include a particular branded drug in their
formularies when a competing generic product is available. The adoption of certain payment methodologies by third-party payors may limit our ability to profit from the sale of SCY-078. For example, under Medicare, hospitals are reimbursed under an
inpatient prospective payment system. This pricing methodology provides a single payment amount to hospitals based on a given diagnosis-related group. As a result, with respect to Medicare reimbursement for services in the hospital inpatient
setting, hospitals could have a financial incentive to use the least expensive drugs for the treatment of invasive fungal infections, particularly the IV formulations of these drugs, as they are typically administered in the hospital, which may
significantly impact our ability to charge a premium for <FONT STYLE="white-space:nowrap">SCY-078.</FONT> </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">All third-party payors, whether
governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs, including mechanisms to encourage the use of generic drugs. Congress has also considered policies to lower the reimbursement formulas in
federal and state healthcare programs. Furthermore, coverage of, and reimbursement for, drugs can differ significantly from payor to payor and may require significant time and resources to obtain. In addition, new laws or regulations could impact
future coverage and reimbursement. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Healthcare policy changes, including the Affordable Care Act, may have a material adverse effect on us. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In recent years, there have been numerous initiatives on the federal and state levels for comprehensive reforms affecting the payment for, the
availability of and reimbursement for healthcare services in the United States, including pharmaceutical products. These initiatives have ranged from proposals to fundamentally change federal and state healthcare reimbursement programs, including
providing comprehensive healthcare coverage to the public under governmental funded programs, to minor modifications to existing programs. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In March 2010, Congress enacted the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation
Act, or the Affordable Care Act. The Affordable Care Act is designed to expand access to affordable health insurance, control healthcare spending, and improve healthcare quality. The law includes provisions to tie Medicare provider reimbursement to
healthcare quality and incentives, mandatory compliance programs, enhanced transparency disclosure requirements, increased funding and initiatives to address fraud and abuse, and incentives to state Medicaid programs to expand their coverage and
services. It also imposes an annual tax on pharmaceutical manufacturers or importers who sell &#147;branded prescription drugs.&#148; Implementation of the Affordable Care Act is occurring on an ongoing basis, and it is unclear what effect the
Affordable Care Act or other state proposals may have on our business. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition to the Affordable Care Act, there will continue to be
proposals by legislators at both the federal and state levels, regulators and third-party payors to keep drug costs down. Certain of these changes could impose limitations on the prices we will be able to charge for any products that are approved or
the amounts of reimbursement available for these products from governmental agencies or third-party payors or may increase the tax requirements for life sciences companies such as ours. We anticipate that the Affordable Care Act and other future
healthcare reform proposals could have a material adverse effect on our industry, and may limit our ability to commercialize SCY-078 and any future product candidates we may seek to develop and/or invest in new development. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We expect that a portion of the market for SCY-078 and any other product candidates we may seek to develop will be outside the United States. However, our
product candidates may never receive approval or be commercialized outside of the United States. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Before we or any commercial partners
can market and commercialize any product candidates outside of the United States, there are numerous and varying regulatory requirements of other countries that will apply. Research and marketing authorization procedures vary among countries and can
involve additional product </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">42 </P>


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testing and administrative review periods. The marketing authorization process in other countries may include all of the risks detailed above regarding failure to obtain FDA approval in the
United States as well as other risks. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country, or identification of potential safety concerns in one
country, may have a negative effect on the regulatory process in others. Failure to obtain regulatory approval in other countries or any delay or setback in obtaining such approval could have the same adverse effects detailed above regarding FDA
approval in the United States. As described above, such effects include the risks that: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">SCY-078 and any future product candidates we may seek to develop may not generate preclinical or clinical data that are deemed sufficient by regulators in a given jurisdiction; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">SCY-078 may not be approved for all indications requested, or any indications at all, in a given jurisdiction which could limit the uses of SCY-078 and any future product candidates we may seek to develop and have an
adverse effect on product sales and potential royalties; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">such approval in a given jurisdiction may be subject to limitations on the indicated uses for which the product may be marketed or require costly post-marketing follow-up studies. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Foreign countries may have requirements for marketing authorization holders or distributors to have a legal or physical presence in that
country, and consideration of and compliance with these requirements may result in additional time and expense before we can pursue or obtain marketing authorization in foreign jurisdictions. If we do receive approval in other countries, we may
enter into sales and marketing arrangements with third parties for international sales of any approved products. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Even if SCY-078 or any other future
product candidates we may seek to develop receive regulatory approval, we may still face future development and regulatory difficulties. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Even if regulatory approval is obtained for SCY-078 or any other future product candidates we may seek to develop, regulatory authorities may
still impose significant restrictions on a product&#146;s indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies. Given the number of high profile adverse safety events with certain drug products,
regulatory authorities may require, as a condition of approval, costly risk evaluation and mitigation strategies, which may include safety surveillance, restricted distribution and use, patient education, enhanced labeling, expedited reporting of
certain adverse events, pre-approval of promotional materials and restrictions on direct-to-consumer advertising. For example, any labeling approved for any of our product candidates may include a restriction on the term of its use, or it may not
include one or more intended indications. Furthermore, any new legislation addressing drug safety issues could result in delays or increased costs during the period of product development, clinical trials and regulatory review and approval, as well
as increased costs to assure compliance with any new post-approval regulatory requirements. Any of these restrictions or requirements could force us or our partners to conduct costly studies. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">SCY-078 and any other future product candidates we may seek to develop will also be subject to ongoing regulatory requirements for the
packaging, storage, advertising, promotion, record-keeping and submission of safety and other post-market information on the drug. In addition, approved products, manufacturers and manufacturers&#146; facilities are required to comply with extensive
FDA requirements, including ensuring that quality control and manufacturing procedures conform to current Good Manufacturing Practices, or cGMP. As such, we and our contract manufacturers, which we will be responsible for overseeing and monitoring
for compliance, are subject to continual review and periodic inspections to assess compliance with cGMP. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including
manufacturing, production and quality control. The FDA may hold us responsible for any deficiencies or noncompliance of our contract manufacturers in relation to SCY-078 and any other future product candidates we may seek to develop. Failure to
follow cGMP can result in products being deemed adulterated, which carries significant legal implications. We will also be required to engage in pharmacovigilance activities and report certain adverse reactions and production problems, if any, to
the FDA and to comply with certain requirements concerning advertising and promotion for products. Promotional </P>
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communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product&#146;s approved label.
As such, we may not promote products for indications or uses for which they do not have approval. Failure to comply with FDA advertising and promotion standards, which are often subject to interpretation by regulators, may result in a wide range of
exposure and liability for us. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If a regulatory agency discovers previously unknown problems with a product, such as adverse events of
unanticipated severity or frequency, or problems with the facility where the product is manufactured or disagrees with the promotion, marketing or labeling of a product, a regulatory agency may impose restrictions on that product or us, including
requiring withdrawal of the product from the market. If the manufacturing or marketing of products fail to comply with applicable regulatory requirements, a regulatory agency may: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%">&nbsp;</TD>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">issue warning letters; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">require us or our partners to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">impose other civil or criminal penalties; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">suspend regulatory approval; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">suspend any ongoing clinical trials; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">refuse to approve pending applications or supplements to approved applications filed by us, our partners or our potential future partners; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">impose restrictions on operations, including costly new manufacturing requirements; or </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">seize or detain products or require a product recall. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Non-compliance may also open a company
to potential whistleblower lawsuits, and the potential for liability under the False Claims Act. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Pharmaceutical companies are subject to significant
ongoing regulatory obligations and oversight, which may result in significant additional expense and limit our ability to commercialize our products. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We are subject to regulation by other regional, national, state and local agencies, including the Department of Justice, the Office of
Inspector General of the U.S. Department of Health and Human Services and other regulatory bodies. Violations of any of the foregoing requirements could result in penalties being assessed against us. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting, or receiving
remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute
has been interpreted to apply to arrangements between pharmaceutical companies on one hand and prescribers, purchasers and formulary managers on the other. The Affordable Care Act, among other things, clarified that a person or entity need not have
actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it. In addition, the Affordable Care Act amended the federal civil False Claims Act to provide that a claim that includes items or services resulting from a
violation of the federal anti-kickback statute, constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.&nbsp;There are a number of statutory exceptions and regulatory safe harbors protecting certain common
activities from prosecution or other regulatory sanctions, however, the exceptions and safe harbors are drawn narrowly, and practices that do not fit squarely within an exception or safe harbor may be subject to scrutiny. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">44 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The federal civil False Claims Act prohibits any person from knowingly presenting, or causing to
be presented, claims for payment of government funds that are false or fraudulent or knowingly making, or causing to be made, a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay
money to the federal government.&nbsp;Many pharmaceutical and other healthcare companies have been investigated and have reached substantial financial settlements with the federal government under these laws for a variety of alleged marketing
activities, including providing free product to customers with the expectation that the customers would bill federal programs for the product; providing consulting fees, grants, free travel, and other benefits to physicians to induce them to
prescribe the company&#146;s products; and inflating prices reported to private price publication services, which are used to set drug payment rates under government healthcare programs. Companies have been prosecuted for causing false claims to be
submitted because of the marketing of their products for unapproved uses. Pharmaceutical and other healthcare companies have also been prosecuted on other legal theories of Medicare and Medicaid fraud. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The majority of states also have statutes or regulations similar to the federal Anti-Kickback Statute and federal civil False Claims Act,
which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.&nbsp;Some of these states also prohibit certain marketing related activities including the provision of
gifts, meals, or other items to certain health care providers. In addition, California, Connecticut, Nevada, and Massachusetts require pharmaceutical companies to implement compliance programs or marketing codes. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Compliance with various federal and state laws is difficult and time consuming, and companies that violate them may face substantial
penalties. The potential sanctions include civil monetary penalties, exclusion of a company&#146;s products from reimbursement under government programs, criminal fines and imprisonment. Because of the breadth of these laws and the lack of extensive
legal guidance in the form of regulations or court decisions, it is possible that some of our business activities or those of our commercial partners could be subject to challenge under one or more of these laws. Such a challenge could have a
material adverse effect on our business and financial condition and growth prospects. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We could become subject to government
investigations and related subpoenas. Such subpoenas are often associated with previously filed qui tam actions, or lawsuits filed under seal under the federal civil False Claims Act. Qui tam actions are brought by private plaintiffs suing on behalf
of the federal government for alleged federal civil False Claims Act violations. The time and expense associated with responding to such subpoenas, and any related qui tam or other actions may be extensive, and we cannot predict the results of our
review of the responsive documents and underlying facts or the results of such actions.&nbsp;Responding to government investigations, defending any claims raised, and any resulting fines, restitution, damages and penalties, settlement payments or
administrative actions, as well as any related actions brought by stockholders or other third parties, could have a material impact on our reputation, business and financial condition and divert the attention of our management from operating our
business. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The number and complexity of both federal and state laws continues to increase, and additional governmental resources are being
added to enforce these laws and to prosecute companies and individuals who are believed to be violating them. In particular, the Affordable Care Act includes a number of provisions aimed at strengthening the government&#146;s ability to pursue
federal Anti-Kickback Statute and federal False Claims Act cases against pharmaceutical manufacturers and other healthcare entities, including substantially increased funding for healthcare fraud enforcement activities, enhanced investigative
powers, and amendments to the federal False Claims Act that make it easier for the government and whistleblowers to pursue cases for alleged kickback and false claim violations.&nbsp;Responding to a government investigation or enforcement action
would be expensive and time-consuming, and could have a material adverse effect on our business and financial condition and growth prospects. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If we fail to comply with applicable federal, state, or local regulatory requirements, we could be subject to a range of regulatory actions
that could affect our ability to commercialize our products and could harm or prevent sales of any affected products that we are able to commercialize, or could substantially increase the costs and </P>
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expenses of commercializing and marketing our products. Any threatened or actual government enforcement action could also generate adverse publicity and require that we devote substantial
resources that could otherwise be used in other aspects of our business. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Regulations, guidelines and recommendations published by various government
agencies and organizations may affect the use of SCY-078 and any future product candidates we may seek to develop. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Government agencies
may issue regulations and guidelines directly applicable to us, our partners or our potential future partners and our product candidates. In addition, professional societies, practice management groups, private health/science foundations and
organizations involved in various diseases from time to time publish guidelines or recommendations to the healthcare and patient communities. These various sorts of recommendations may relate to such matters as product usage, dosage, and route of
administration and use of related or competing therapies. Changes to these recommendations or other guidelines advocating alternative therapies could result in decreased use of SCY-078 and any future product candidates we may seek to develop, which
may adversely affect our results of operations. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Risks Relating to Our Contract Research and Development Services </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We are substantially dependent on our agreement with Merial for generation of our revenues, and that agreement expires on December&nbsp;31, 2014.* </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We have a research services contract with Merial Limited, or Merial, under which we perform research services for Merial, including the
synthesis, purification, and characterization of individual or libraries of compounds, phenotypic screening of compounds, and further testing and optimizing of compounds to support the development of animal health products, which agreement expires
on December&nbsp;31, 2014. Revenues from this contract have accounted for 39% and 43% of our total revenues for the period ending March&nbsp;31, 2014 and the year ended December&nbsp;31, 2013. If we are not able to extend or replace this contract
upon expiration, or if this contract were to terminate prior to December&nbsp;31, 2014, our ability to generate revenues prior to the commercialization of SCY-078 would be significantly impaired. Merial may also terminate the agreement prior to
December&nbsp;31, 2014 under specified circumstances, including in the event of breach by us of a material obligation if such breach is not remedied after written notice from Merial, or if Merial believes in good faith that we have acted in any way
that may subject Merial to liability under anti-corruption laws. During the term and for a period of one year after termination of this agreement for any reason, we cannot provide services to another animal health company using the same intellectual
property developed under this agreement, which could also significantly impair our ability to generate revenue from our contract research and development services should this contract terminate. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We face potential liability and exposure as a result of the performance of our contract research and development services, and if successful claims are
brought against us, we may incur substantial liability, which may exceed the revenues we have received for the performance of our contract research and development services. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">To date substantially all of our revenue has been generated from the provision of our contract research and development services. In the event
that a regulator asserts that we have conducted activities in a non-compliant manner or a customer asserts that we have conducted our contract research and development services negligently, or otherwise asserts that as a result of the performance of
our contract research and development services for that client we have somehow harmed their business or the prospects of their product candidates, we could be subject to litigation, which could divert management&#146;s attention from the operation
of our business, including the development of SCY-078. Further, if such litigation is successful, or if we determine that we must settle the litigation, we could be forced to pay substantial damages, which could be more than the revenues that we
generated from that customer, as the services that we perform are only a small portion of the development efforts of our customers. Even if we are successful in defending any such claims, we could incur substantial legal costs to do so. Further,
publicity of any such litigation or claims could hurt the reputation of our ability to perform </P>
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contract research and development services, which could cause revenue generated from our contract research and development services to decline. Any such litigation against us could result in
substantial costs and divert our management&#146;s attention from other business concerns, which could seriously harm our business. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Risks Related to Our Dependence on Third Parties </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We are dependent on our existing third-party collaboration with R-Pharm to commercialize SCY-078 in the Russian Federation and certain other countries, and
if R-Pharm is not successful in commercializing SCY-078 in those countries, we will lose a significant source of revenue. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We currently
have a development license and supply agreement with R-Pharm, CJSC, or R-Pharm, a leading supplier of hospital drugs in Russia, pursuant to which we license to R-Pharm rights to develop and commercialize SCY-078 in the field of human health in
Russia and certain smaller non-core markets. R-Pharm will pay us milestone payments upon the achievement of specified milestones, including registration of SCY-078 in a country and upon the achievement of specified levels of sales. In addition,
R-Pharm will pay us royalties upon sales of SCY-078 by R-Pharm. We are relying on R-Pharm to commercialize SCY-078 in the countries covered by our agreement with it, and if R-Pharm is not able to commercialize SCY-078 in those countries, or
determines not to pursue commercialization of SCY-078 in those countries, we will not receive any milestone or royalty payments under the agreement. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We are dependent on other third-party collaborations to develop and commercialize product candidates we have outlicensed, and if our third-party
collaborators are not successful in developing and commercializing product candidates we have outlicensed, we will not receive any revenue from these collaborations. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">A significant portion of our strategy is to license to third parties rights to develop and commercialize product candidates we have discovered
other than SCY-078, and if these third parties do not perform under our agreements with them, we will not receive any revenue from these collaborations. For example, we currently have a license agreement with Dechra Ltd., or Dechra, pursuant to
which we license to Dechra rights to develop and commercialize SCY-641 for use in animal health, and will receive royalties from Dechra on sales of SCY-641. We are relying on Dechra to commercialize SCY-641, and if Dechra is not able to
commercialize SCY-641, or determines not to pursue commercialization of SCY-641, we will not receive any royalty payments under the agreement. If our third-party collaborators under this and any future agreements we enter into do not perform under
these agreements, we will not receive the benefits we expect under these agreements. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We are dependent on our existing third-party collaborations in
animal health to fund additional development opportunities and expect to continue to expend resources in our current collaborations, and if these collaborations fail, then we will lose a significant source of revenues. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We provide contract research and development services in the field of animal health which is a source of significant revenues to us. For
example, we have an agreement with Merial, pursuant to which we provide contract research and development services that primarily target parasites, which includes the synthesis, purification, and characterization of individual or libraries of
compounds, phenotypic screening of compounds, and further testing and optimizing of compounds for the use of commercializing animal health products. If we are not able to continue to enter into and perform under these services agreements, we will
lose the ability to generate significant revenues. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We may not be successful in establishing and maintaining development and commercialization
collaborations, which could adversely affect our ability to develop and commercialize product candidates. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Developing pharmaceutical
products, conducting clinical trials, obtaining regulatory approval, establishing manufacturing capabilities and marketing approved products is expensive. Consequently, we plan to establish collaborations for development and commercialization of
product candidates and research programs. For example, we currently have a development license and supply agreement with R-Pharm, pursuant to which we </P>
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license to R-Pharm rights to develop and commercialize SCY-078 in the field of human health in Russia and certain smaller non-core markets, and if SCY-078 receives marketing approval, we may
enter into additional sales and marketing arrangements with third parties for international sales. If we are unable to enter into any of these arrangements on acceptable terms, or at all, we may be unable to market and sell SCY-078 and any future
product candidates we may seek to develop in certain markets. We expect to face competition in seeking appropriate collaborators. Moreover, collaboration arrangements are complex and time consuming to negotiate, document and implement and they may
require substantial resources to maintain. We may not be successful in our efforts to establish and implement collaborations or other alternative arrangements for the development of product candidates. When we partner with a third party for
development and commercialization of a product candidate, we can expect to relinquish to the third party some or all of the control over the future success of that product candidate. Our collaboration partner may not devote sufficient resources to
the commercialization of product candidates or may otherwise fail in their commercialization. The terms of any collaboration or other arrangement that we establish may not be favorable to us. In addition, any collaboration that we enter into may be
unsuccessful in the development and commercialization of product candidates. In some cases, we may be responsible for continuing preclinical and initial clinical development of a partnered product candidate or research program, and the payment we
receive from our collaboration partner may be insufficient to cover the cost of this development. If we are unable to reach agreements with suitable collaborators for product candidates, we could face increased costs, we may be forced to limit the
number of product candidates we can commercially develop or the territories in which we commercialize them and we might fail to commercialize products or programs for which a suitable collaborator cannot be found. If we fail to achieve successful
collaborations, our operating results and financial condition will be materially and adversely affected. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We depend on third-party contractors for a
substantial portion of our drug development activities and may not be able to control their work as effectively as if we performed these functions ourselves. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We outsource, and intend to continue to outsource, substantial portions of our drug development activities to third-party service providers,
including manufacturing and the conduct of our clinical trials and various preclinical studies. Our agreements with third-party service providers and CROs are and will be on a study-by-study basis and typically short-term. In all cases, we expect to
be able to terminate the agreements with notice and be responsible for the supplier&#146;s previously incurred costs. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Because we rely on
third parties, our internal capacity to perform these functions is limited. Outsourcing these functions involves risk that third parties may not perform to our standards, may not produce results in a timely manner or may fail to perform at all. Even
if we outsource activities, in most cases regulators will hold us responsible for the compliance of the activities performed, and hold us responsible for oversight and monitoring of the activities. In addition, the use of third-party service
providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated. There are a limited number of third-party service providers that have the expertise required
to achieve our business objectives. Identifying, qualifying and managing performance of third-party service providers can be difficult and time consuming and could cause delays in our development programs. We currently have a small number of
employees devoted to clinical development activities, which limits the internal resources we have available to identify and monitor our third-party providers. To the extent we are unable to identify, retain and successfully manage the performance of
third-party service providers in the future, our business may be adversely affected. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We have no experience manufacturing product candidates on a large
clinical or commercial scale. As a result, we are and will be dependent on third parties for the manufacture of SCY-078 and any future product candidates we may seek to develop, and if we experience problems with any of these third parties, the
commercial manufacturing of SCY-078 and any future product candidates we may seek to develop could be delayed. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We have a small number
of personnel with experience in drug product manufacturing. If SCY-078 is approved, the inability to manufacture sufficient commercial supplies of the drug product could adversely affect product commercialization. We do not currently have any
agreements with third-party manufacturers for the </P>
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long-term commercial supply of our product candidates, including SCY-078. We may encounter technical difficulties or delays in the transfer of SCY-078 manufacturing on a commercial scale to a
third-party manufacturer, or may be unable to enter into agreements for commercial supply with third-party manufacturers, or may be unable to do so on acceptable terms. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We may not be able to establish additional sources of supply for SCY-078 and any future product candidates we may seek to develop. These
suppliers are subject to regulatory requirements covering manufacturing, testing, quality control and record keeping relating to product candidates and are also subject to ongoing inspections by the regulatory agencies. Failure by any of our
suppliers to comply with applicable regulations may result in long delays and interruptions to our product candidate supply while we seek to secure another supplier that meets all regulatory requirements. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured product candidates ourselves,
including: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">the possible breach of the manufacturing agreements or violation of regulatory standards by the third parties because of factors beyond our control; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">the possibility of termination or nonrenewal of the agreements by the third parties because of our breach of the manufacturing agreement or based on their own business priorities. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Any of these factors could result in delays or higher costs in connection with our clinical trials, regulatory submissions, required approvals
or commercialization of SCY-078 and any future product candidates we may seek to develop. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>If we fail to establish or lose our relationships with CROs,
our drug development efforts could be delayed. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We are substantially dependent on third-party vendors and CROs for preclinical studies
and clinical trials related to our drug discovery and development efforts. If we fail to establish or lose our relationship with any one or more of these providers, we could experience a significant delay in both identifying another comparable
provider and then contracting for its services, which could adversely affect our development efforts. We may be unable to retain an alternative provider on reasonable terms, or at all. Even if we locate an alternative provider, it is likely that
this provider will need additional time to respond to our needs and may not provide the same type or level of services as the original provider. In addition, any contract research organization that we retain will be subject to the FDA&#146;s
regulatory requirements and similar foreign standards and we do not have control over compliance with these regulations by these providers. Consequently, if these practices and standards are not adhered to by these providers, the development and
commercialization of SCY-078 and any future product candidates we may seek to develop could be delayed, which could severely harm our business and financial condition. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Risks Relating to Our Intellectual Property </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We are dependent on Merck for the establishment of our intellectual property rights related to SCY-078, and if Merck has not established our intellectual
property rights with sufficient scope to protect SCY-078, we may have limited or no ability to assert intellectual property rights to SCY-078. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Under our agreement with Merck, Merck was responsible for establishing the intellectual property rights to SCY-078. As we were not responsible
for the establishment of our intellectual property rights to SCY-078, we have less visibility into the strength of our intellectual property rights to SCY-078 than if we had been responsible for the establishment of these rights. If Merck did not
establish those rights so they are of sufficient scope to protect SCY-078, then we may not be able to prevent others from using or commercializing SCY-078, and others may be able to assert intellectual property rights in SCY-078 and prevent us from
further pursuing the development and commercialization of SCY-078. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their
protection. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of
SCY-078 and any future product candidates we may seek to develop and the methods used to manufacture them, as well as successfully defending these patents against third-party challenges. Our ability to stop third parties from making, using, selling,
offering to sell or importing SCY-078 and any future product candidates we may seek to develop is dependent upon the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The patent positions of pharmaceutical companies can be highly uncertain and involve complex legal and factual questions for which important
legal principles remain unresolved. No absolute policy regarding the breadth of claims allowed in pharmaceutical patents has emerged to date in the United States or in many foreign jurisdictions. Changes in either the patent laws or in
interpretations of patent laws in the United States and foreign jurisdictions may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be enforced in the patents that we currently own or that
may be issued from the applications we have filed or may file in the future or that we have licensed or may license from third parties, including Merck for SCY-078. Further, if any patents we obtain or license are deemed invalid and unenforceable,
it could impact our ability to commercialize or license our technology. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The degree of future protection for our proprietary rights is
uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">others may be able to make compounds that are similar to SCY-078 and any future product candidates we may seek to develop but that are not covered by the claims of our patents; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">if we encounter delays in our clinical trials, the period of time during which we could market our drug candidates under patent protection would be reduced; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">we might not have been the first to conceive, make or disclose the inventions covered by our patents or pending patent applications; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">we might not have been the first to file patent applications for these inventions; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">any patents that we obtain may be invalid or unenforceable or otherwise may not provide us with any competitive advantages; or </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">the patents of others may have a material adverse effect on our business. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Due to the patent
laws of a country, or the decisions of a patent examiner in a country, or our own filing strategies, we may not obtain patent coverage for all of the product candidates that may be disclosed or methods involving these candidates that may be
disclosed in the parent patent application. We plan to pursue divisional patent applications and/or continuation patent applications in the United States and many other countries to obtain claim coverage for inventions that were disclosed but not
claimed in the parent patent application, but may not succeed in these efforts. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Composition of matter patents on the active
pharmaceutical ingredient are generally considered to be the strongest form of intellectual property protection for pharmaceutical products, as such patents generally provide protection without regard to any method of use. We cannot be certain that
the claims in our patent applications covering composition-of-matter of our drug candidates will be considered patentable by the U.S. Patent and Trademark Office, or USPTO, courts in the United States or by the patent offices and courts in foreign
countries. Method of use patents protect the use of a product for the method recited in the claims. This type of patent does not prevent a competitor from making and marketing a product that is identical to our product for an indication that is
outside the scope of the patented method. Moreover, even if competitors do not actively promote their product for our targeted indications, physicians may prescribe these products &#147;off-label.&#148; Although off-label
</P>
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prescriptions may infringe or contribute to or induce the infringement of method of use patents, the practice is common and such infringement is difficult to prevent or prosecute. Interference
proceedings provoked by third parties or brought by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our collaborators or licensors. An unfavorable outcome could
require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation or
interference proceedings may fail resulting in harm to our business, and, even if successful, may result in substantial costs and distract our management and other employees. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">There have been numerous changes to the patent laws and proposed changes to the rules of the USPTO, which may have a significant impact on our
ability to protect our technology and enforce our intellectual property rights. For example, in September 2011, President Obama signed the America Invents Act that codifies several significant changes to the U.S. patent laws, including, among other
things, changing from a &#147;first to invent&#148; to a &#147;first inventor to file&#148; system, limiting where a patent holder may file a patent suit, replacing interference or &#147;first to invent&#148; proceedings with derivation proceedings
and creating inter partes review and post-grant opposition proceedings to challenge the validity of patents after they have been issued. The effects of these changes are currently unclear as the USPTO only recently has adopted regulations
implementing the changes, the courts have yet to address any of these provisions, and the applicability of the act and new regulations on specific patents and patent applications discussed herein have not been determined and would need to be
reviewed. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages
over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an
inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application,
resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official
actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We also rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or
obtainable. However, trade secrets are difficult to protect. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, licensees, licensors, outside scientific collaborators and other advisors may
unintentionally or willfully disclose our information such that our competitors may obtain it. Enforcing a claim that a third party illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is
unpredictable. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how, such as new therapies, including therapies for the indications we are targeting. If others seek to develop similar therapies, their
research and development efforts may inhibit our ability to conduct research in certain areas and to expand our intellectual property portfolio, and also have a material adverse effect on our business. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be
unable to enforce or protect our rights to, or use, our technology. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If we choose to go to court to stop another party from using the
inventions claimed in any patents we obtain, that individual or company has the right to ask the court to rule that such patents are invalid or should not be enforced. These lawsuits are expensive and would consume time and resources and divert the
attention of managerial and scientific personnel even if we were successful in stopping the infringement of such patents or sustaining their validity and enforceability. In addition, there is a risk that the court will decide that such patents are
not valid and that we do not have the right to enforce them. There is also the risk that, even if the validity of </P>
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such patents is upheld, the court will refuse to stop the other party on the grounds that such other party&#146;s activities do not infringe such patents. In addition, the United States Court of
Appeals for the Federal Circuit and the Supreme Court of the United States continue to address issues under the United States patent laws, and the decisions of those and other courts could adversely affect our ability to sustain the validity of our
issued or licensed patents and obtain new patents. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Furthermore, a third party may claim that we or our manufacturing or commercialization
partners or customers are using inventions covered by the third party&#146;s patent rights and may go to court to stop us or our partners and/or customers from engaging in our operations and activities, including making or selling SCY-078 and any
future product candidates we may seek to develop. These lawsuits are costly and could affect our results of operations and divert the attention of managerial and scientific personnel. There is a risk that a court would decide that we or our
commercialization partners or customers are infringing the third party&#146;s patents and would order us or our partners or customers to stop the activities covered by the patents. In that event, we or our commercialization partners or customers may
not have a viable way around the patent and may need to halt commercialization or use of the relevant product. In addition, there is a risk that a court will order us or our partners or customers to pay the other party damages for having violated
the other party&#146;s patents or obtain one or more licenses from third parties, which may be impossible or require substantial time and expense. We cannot predict whether any license would be available at all or whether it would be available on
commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our drug candidates, and we have done so from time to time. We may
fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In such events, we would be unable to further develop and commercialize one or more of our drug candidates, which could harm our business significantly. In
the future, we may agree to indemnify our commercial partners and/or customers against certain intellectual property infringement claims brought by third parties which could increase our financial expense, increase our involvement in litigation
and/or otherwise materially adversely affect our business. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Because of the substantial amount of discovery required in connection with
intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation, which could adversely affect our intellectual property rights and our business. In
addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on
the price of our common stock. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The pharmaceutical and biotechnology industries have produced a proliferation of patents, and it is not
always clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. For example, we
are aware of the existence of other patents relating to the treatment of Hepatitis&nbsp;C Virus which, if we are determined to infringe, may limit our ability to fully commercialize SCY-635. If we are sued for patent infringement, we would need to
demonstrate that our products or methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be able to do this. Proving invalidity or unenforceability is difficult.
For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Because some patent applications in the United States may be maintained in secrecy until the patents are issued, because patent applications
in the United States and many foreign jurisdictions are typically not published until eighteen months after filing, because searches and examinations of patent applications by the USPTO and other patent offices may not be comprehensive, and because
publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our patents or pending applications. Our competitors may have filed, and may
in the future file, patent applications and may have obtained patents covering technology similar to ours. Any such patents or patent application may have priority over our patent applications, which could further require us to obtain or license
rights to issued patents covering such technologies. If another party has obtained a U.S. patent or filed a </P>
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U.S. patent application on inventions similar to ours, we may have to participate in a proceeding before the USPTO or in the courts to determine which patent or application has priority. The
costs of these proceedings could be substantial, and it is possible that our application or patent could be determined not to have priority, which could adversely affect our intellectual property rights and business. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We have received confidential and proprietary information from collaborators, prospective licensees and other third parties. In addition, we
employ individuals who were previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants or independent contractors have improperly used or disclosed confidential
information of these third parties or our employees&#146; former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial cost and be a
distraction to our management and employees. If we are not successful, our ability to continue our operations and our business could be materially, adversely affected. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Some of our competitors may be able to sustain the costs of complex intellectual property litigation more effectively than we can because they
have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations, on our
ability to hire or retain employees, or otherwise on our business. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Risks Related to Employee Matters and Managing Growth </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We may not be able to manage our business effectively if we are unable to attract and retain key personnel.* </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We may not be able to attract or retain qualified management, finance, scientific and clinical personnel in the future due to the intense
competition for qualified personnel among biotechnology, pharmaceutical and other businesses, particularly in the Research Triangle Park area in North Carolina, where we have our offices and research facilities. Stock-based awards are critical to
our ability to recruit, retain and motivate highly skilled talent. The exercise price of a substantial majority of the stock options currently held by our executive officers and key employees is above, and in some cases significantly above, the
closing price of our common stock as listed on the NASDAQ Global Market on June&nbsp;13, 2014 of $9.10 per share. This may reduce the retention value of these options, in which case we may need to grant additional stock options or reprice
outstanding options to continue to retain our employees, especially our key employees and executive officers. If we are not able to attract and retain necessary personnel to accomplish our business objectives, we may experience constraints that will
significantly impede the achievement of our development objectives, our ability to raise additional capital and our ability to implement our business strategy. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We are highly dependent on the development, regulatory, commercialization and business development expertise of our executive officers and key
employees, especially our Chief Executive Officer, Yves Ribeill, and our Chief Medical Officer, Carole Sable. If we lose one or more of our executive officers or key employees, our ability to implement our business strategy successfully could be
seriously harmed. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We may need to expand our operations and increase the size of our company, and we may experience difficulties in managing growth.
</B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As we advance SCY-078 through preclinical studies, clinical trials and commercialization, we will need to increase our product
development, scientific, marketing, sales and administrative headcount to manage these efforts. Our management, personnel and systems currently in place may not be adequate to support this future growth. Our need to effectively manage our
operations, growth and various projects requires that we: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%">&nbsp;</TD>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">successfully attract and recruit new employees with the expertise and experience we will require; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">manage our clinical programs effectively, which we anticipate being conducted at numerous clinical sites; </TD></TR></TABLE>
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<TD ALIGN="left" VALIGN="top">develop a marketing and sales infrastructure; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">continue to develop our operational, financial and management controls, reporting systems and procedures. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If we are unable to successfully manage this growth, our business may be adversely affected. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Other Risks Relating to Our Business </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We face potential product liability exposure, and if successful claims are brought against us, we may incur substantial liability for a product candidate
and may have to limit its commercialization. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The use of product candidates in clinical trials and the sale of any products for which
we may obtain marketing approval expose us to the risk of product liability claims. Product liability claims may be brought against us or our partners by participants enrolled in our clinical trials, patients, healthcare providers or others using,
administering or selling products. If we cannot successfully defend ourselves against any such claims, we would incur substantial liabilities. Regardless of merit or eventual outcome, product liability claims may result in: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">withdrawal of clinical trial participants; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">termination of clinical trial sites or entire trial programs; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">costs of related litigation; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">substantial monetary awards to patients or other claimants; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%">&nbsp;</TD>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">decreased demand for product candidates and loss of revenue; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">impairment of our business reputation; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%">&nbsp;</TD>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">diversion of management and scientific resources from our business operations; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%">&nbsp;</TD>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the inability to commercialize product candidates. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We have obtained limited product liability
insurance coverage for our clinical trials domestically and in selected foreign countries where we are conducting clinical trials. Our coverage is currently limited to $5.0&nbsp;million per occurrence and $5.0&nbsp;million in the aggregate per year,
as well as additional local country product liability coverage for trials conducted outside of the United States as required by the local country regulations. As such, our insurance coverage may not reimburse us or may not be sufficient to reimburse
us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against
losses due to product liability. We intend to expand our insurance coverage for products to include the sale of commercial products if we obtain marketing approval for product candidates, but we may be unable to obtain commercially reasonable
product liability insurance for any products approved for marketing. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought
against us, particularly if judgments exceed our insurance coverage, could decrease our cash necessary to develop SCY-078 and any future product candidates we may seek to develop and adversely affect our business. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Our operations involve hazardous materials, which could subject us to significant liabilities. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Our research and development processes involve the controlled use of hazardous materials, including chemicals. Our operations produce hazardous
waste products. We cannot eliminate the risk of accidental contamination or discharge or injury from these materials. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of these materials. We
could be subject to civil damages in the event of exposure of individuals to hazardous materials. In addition, claimants may sue us for injury or </P>
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contamination that results from our use of these materials and our liability may exceed our total assets. We have general liability insurance coverage of up to $1.0&nbsp;million per occurrence,
with an annual aggregate limit of $2.0&nbsp;million, which excludes pollution liability. This coverage may not be adequate to cover all claims related to our biological or hazardous materials. Furthermore, if we were to be held liable for a claim
involving our biological or hazardous materials, this liability could exceed our insurance coverage, if any, and our other financial resources. Compliance with environmental and other laws and regulations may be expensive and current or future
regulations may impair our research, development or production efforts. In addition, failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Our insurance policies are expensive and protect us only from some business risks, which will leave us exposed to significant uninsured liabilities.
</B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We do not carry insurance for all categories of risk that our business may encounter. Some of the policies we currently maintain
include general liability, employment practices liability, property, auto, workers&#146; compensation, products liability and directors&#146; and officers&#146; insurance. We do not know, however, if we will be able to maintain existing insurance
with adequate levels of coverage. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our cash position and results of operations. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Our research and development activities could be affected or delayed as a result of possible restrictions on animal testing. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Certain laws and regulations require us to test our product candidates on animals before initiating clinical trials involving humans. Animal
testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas
and by disrupting these activities through protests and other means. To the extent the activities of these groups are successful, our research and development activities may be interrupted, delayed or become more expensive. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Risks Relating to Owning Our Common Stock </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The market price of our common stock may be highly volatile.* </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The trading price of our common stock may be volatile. The following factors, in addition to other factors described in this &#147;Risk
Factors&#148; section and elsewhere in this quarterly report, may have a significant impact on the market price of our common stock: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the results of our preclinical testing or clinical trials; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the ability to obtain additional funding; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">any delay in filing an NDA or similar foreign applications for SCY-078 and any future product candidate we may seek to develop or any adverse development or perceived adverse development with respect to the FDA&#146;s
review of that NDA or a foreign regulator&#146;s review of a similar applications; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">maintenance of our existing collaborations or ability to enter into new collaborations; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">our collaboration partners&#146; election to develop or commercialize product candidates under our collaboration agreements or the termination of any programs under our collaboration agreements; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">any intellectual property infringement actions in which we or our licensors and collaboration partners may become involved; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">our ability to successfully develop and commercialize future product candidates; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">changes in laws or regulations applicable to future products; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">adverse regulatory decisions; </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">55 </P>


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<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">introduction of new products, services or technologies by our competitors; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">achievement of financial projections we may provide to the public; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">achievement of the estimates and projections of the investment community; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us, our collaboration partners or our competitors; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">legislation or regulation that mandates or encourages the use of generic products; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">additions or departures of key scientific or management personnel; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">significant lawsuits, including patent or stockholder litigation; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">changes in the market valuations of similar companies; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">general economic and market conditions and overall fluctuations in the U.S. equity markets; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">sales of our common stock by us, our executive officers and directors or our stockholders in the future; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">trading volume of our common stock. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition, companies trading in the stock market in
general, and the NASDAQ Global Market in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may
negatively affect the market price of our common stock, regardless of our actual operating performance. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Our executive officers, directors and
principal stockholders own a significant percentage of our stock and will be able to exert significant control over matters submitted to our stockholders for approval.* </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As of June 1, 2014, our executive officers, directors and stockholders who own more than 5% of our outstanding common stock, together own
shares representing approximately 60% of our common stock. Therefore, these stockholders will have the ability to influence us through this ownership position. These stockholders may be able to influence matters requiring stockholder approval. For
example, these stockholders, acting together, may be able to control elections of directors, amendments to our organizational documents, or approval of any merger, sale of assets, or other major corporate action. This may prevent or discourage
unsolicited acquisition proposals or offers for our common stock that you may believe are in your best interest as one of our stockholders. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We have
identified material weaknesses in our internal controls over financial reporting. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Maintaining effective internal controls over
financial reporting is necessary for us to produce accurate financial statements on a timely basis. We have previously identified material weaknesses in our internal control over financial reporting. We are currently in the process of remediating
these material weaknesses by, among other things, designing and implementing new procedures and controls. Management continues to devote significant time and attention to remediating these material weaknesses and improving our internal controls, and
we expect to continue to incur costs associated with implementing appropriate processes, which could include fees for additional audit and consulting services, which could negatively affect our financial condition and operating results. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">56 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The requirements associated with being a public company will require significant company resources and
management attention.* </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We have recently completed our IPO and become subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the listing requirements of the NASDAQ Global Market and other applicable securities rules and regulations. The Exchange Act requires that we
file annual, quarterly and current reports with respect to our business and financial condition and maintain effective disclosure controls and procedures and internal control over financial reporting. In addition, subsequent rules implemented by the
SEC and The NASDAQ Stock Market may also impose various additional requirements on public companies. As a result, we will incur additional legal, accounting and other expenses that we did not incur as a nonpublic company, particularly after we are
no longer an &#147;emerging growth company&#148; as defined in the JOBS Act. Further, the need to establish the corporate infrastructure demanded of a public company may divert management&#146;s attention from implementing our growth strategy. We
have made, and will continue to make, changes to our corporate governance standards, disclosure controls and financial reporting and accounting systems to meet our reporting obligations. However, the measures we take may not be sufficient to satisfy
our obligations as a public company, which could subject us to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Section&nbsp;404(a) of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over
financial reporting, starting with the second annual report that we would expect to file with the SEC, and we are required to disclose material changes made in our internal controls and procedures on a quarterly basis. Company responsibilities
required by the Sarbanes-Oxley Act include establishing corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for us to produce reliable financial
reports and are important to help prevent financial fraud. However, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to
Section&nbsp;404(b) of the Sarbanes-Oxley Act until the later of the year following our first annual report required to be filed with the SEC or the date we are no longer an &#147;emerging growth company&#148; as defined in the JOBS Act, because we
are taking advantage of the exemptions contained in the JOBS Act. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">To build the infrastructure to allow us to assess the effectiveness of
our internal control over financial reporting, we will need to hire additional accounting personnel and improve our accounting systems, disclosure policies, procedures and controls, which will be costly and time consuming. If we are unsuccessful in
building an appropriate accounting infrastructure, we may not be able to prepare and disclose, in a timely manner, our financial statements and other required disclosures, or comply with existing or new reporting requirements. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal
control over financial reporting is effective. We cannot assure you that there will not be material weaknesses in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could
severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to achieve effective internal control over financial reporting, or if our independent registered public accounting firm
determines we have a material weakness in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be
subject to sanctions or investigations by The NASDAQ Stock Market, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control
systems required of public companies, could also restrict our future access to the capital markets. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">57 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The recently enacted JOBS Act will allow us to postpone the date by which we must comply with some of the laws
and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the SEC, which could undermine investor confidence in our company and adversely affect the market price of our common stock.
</B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">For so long as we remain an &#147;emerging growth company&#148; as defined in the JOBS Act, we may take advantage of certain
exemptions from various requirements that are applicable to public companies that are not &#147;emerging growth companies&#148; including: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the provisions of Section&nbsp;404(b) of the Sarbanes-Oxley Act requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial
reporting; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the obligation to provide three years of audited financial statements; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the &#147;say on pay&#148; provisions, requiring a non-binding stockholder vote to approve compensation of certain executive officers, and the &#147;say on golden parachute&#148; provisions, requiring a non-binding
stockholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations, of the Dodd-Frank Act and some of the disclosure requirements of the Dodd-Frank Act relating
to compensation of our chief executive officer; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the requirement to provide detailed compensation discussion and analysis in proxy statements and reports filed under the Exchange Act, and instead provide a reduced level of disclosure concerning executive compensation;
and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">any rules that may be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor&#146;s report on the financial statements. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We currently intend to take advantage of some of the reduced regulatory and reporting requirements that will be available to us under the JOBS
Act so long as we qualify as an &#147;emerging growth company.&#148; </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Sales of a substantial number of shares of our common stock in the public market
by our existing stockholders could cause our stock price to fall.* </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Sales of a substantial number of shares of our common stock in the
public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect
that sales may have on the prevailing market price of our common stock. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">All of the shares of common stock sold in our IPO are freely
tradable without restrictions or further registration under the Securities Act of 1933, as amended, or the Securities Act, except for any shares held by our affiliates as defined in Rule&nbsp;144 under the Securities Act or our current stockholders
pursuant to lock-up agreements. Substantially all of the remaining 2,247,437&nbsp;shares of common stock outstanding after our IPO based on 2,252,641&nbsp;shares outstanding as of March&nbsp;31, 2014, are restricted as a result of securities laws,
lock-up agreements or other contractual restrictions that restrict transfers until October&nbsp;29, 2014. RBC Capital Markets, LLC may, in its sole discretion, release all or some portion of the shares subject to lock-up agreements prior to
expiration of the lock-up period. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Certain holders of our securities are entitled to rights with respect to the registration of their
shares under the Securities Act, subject to the applicable lock-up arrangement described above. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act.
Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">58 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Future sales and issuances of our common stock or rights to purchase common stock could result in additional
dilution of the percentage ownership of our stockholders and could cause our stock price to fall. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We expect that significant
additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible
securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. These sales may also result in new investors gaining rights superior to our existing stockholders. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Because we do not intend to declare cash dividends on our shares of common stock in the foreseeable future, stockholders must rely on appreciation of the
value of our common stock for any return on their investment. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We currently anticipate that we will retain future earnings for the
development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends in the future. As a result, we expect that only appreciation of the price of our common stock, if any, will provide a return to our
investors for the foreseeable future. Investors seeking cash dividends should not invest in our common stock. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>If securities or industry analysts do
not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our common stock adversely, the price of our common stock and trading volume could decline. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The trading market for our common stock will be influenced by the research and reports that securities or industry analysts may publish about
us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our common stock adversely, or provide more favorable relative recommendations about our competitors, the price of our
common stock would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price of our common
stock or trading volume to decline. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>We may be subject to securities litigation, which is expensive and could divert management attention. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Our share price may be volatile, and in the past, companies that have experienced volatility in the market price of their stock have been
subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management&#146;s attention and resources, which could seriously
harm our business. Any adverse determination in litigation could also subject us to significant liabilities. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Anti-takeover provisions in our charter
documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Provisions in our amended and restated certificate of incorporation and our bylaws may delay or prevent an acquisition of us, including the
ability of our board of directors to establish new series of preferred stock and issue shares of these new series, which could be used by our board of directors to oppose a hostile takeover attempt, which some stockholders may believe would be in
the best interests of stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of
directors, which is responsible for appointing the members of our management, including the elimination of cumulative voting, inability of our stockholders to call special meetings or take action by written consent, ability of our board of directors
to fill board vacancies, and ability of our board of directors to determine the size of the board of directors. In addition, we are subject to Section&nbsp;203 of the Delaware General Corporation Law, which generally prohibits stockholders owning in
excess of 15% of our outstanding voting stock from merging or combining with </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">59 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
us. Finally, our charter documents establish advance notice requirements for nominations for election to our board of directors and for proposing matters that can be acted upon at stockholder
meetings. Although we believe these provisions together provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would apply even if the offer may be considered beneficial by
some stockholders. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc722469_10"></A>Item&nbsp;2. Unregistered Sales of Equity Securities and Use of Proceeds </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Unregistered Sales of Equity Securities </I></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(1)</TD>
<TD ALIGN="left" VALIGN="top">On January&nbsp;31, 2014, we sold 388,641 shares of our Series D-2 Preferred Stock and warrants exercisable for 19,048 shares of our common stock to five investors for aggregate proceeds of $544,100. The shares and
warrants were sold to the investors in reliance on Rule 506 of Regulation D, in that all of the investors represented that they were &#147;accredited investors&#148; as that term is defined in Regulation D. The shares of Series D-1 Preferred Stock
were convertible into shares of our common stock at the request of the holder or upon consummation of any initial public offering of our common stock with aggregate proceeds in excess of $20 million. The warrants were exercisable for shares or our
common stock at a price of $.20 per share. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(2)</TD>
<TD ALIGN="left" VALIGN="top">From January&nbsp;1, 2014, to March&nbsp;31, 2014, we issued options to purchase an aggregate of 48,847 shares of common stock to 7 of our employees, directors and consultant at a weighted average exercise price of
$11.13, in reliance on Section&nbsp;4(2) and Rule 701 under the Securities Act. In addition, from January&nbsp;1, 2014 to March&nbsp;31, 2014, we issued 416 shares of common stock to 3 of our employees, directors and consultants pursuant to the
exercise of outstanding options for aggregate proceeds of $8,500 in reliance on Section&nbsp;4(2) and Rule 701 under the Securities Act. </TD></TR></TABLE>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Use of Proceeds </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On May&nbsp;2, 2014, our
registration statement on Form S-1 (File No.&nbsp;333-194192) was declared effective for our initial public offering of 6,200,000 shares of our common stock at a price of $10.00 per share for aggregate gross proceeds of $62,000,000 to us. As a
result of our IPO, which closed on May&nbsp;7, 2014, we received net proceeds of approximately $54.8 after deducting underwriting discounts and commissions of approximately $3.3 million and offering expenses payable by us of approximately $3.9
million. In addition, we paid off $15 million and all accrued interest on our credit facility with HSBC Bank on May&nbsp;7, 2014. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">There
has been no material change in the planned use of proceeds from our initial public offering as described in our prospectus effective May&nbsp;2, 2014, filed with the SEC pursuant to Rule 424(b) of the Securities Act. </P>
<P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><B><A NAME="toc722469_11"></A>Item&nbsp;6.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Exhibits </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">See the Exhibit&nbsp;Index which follows the signature page&nbsp;of this
Quarterly Report on Form&nbsp;10-Q, which is incorporated herein by reference. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">60 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc722469_12"></A>SIGNATURES </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt">


<TR>
<TD WIDTH="10%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="89%"></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3">SCYNEXIS,&nbsp;INC.</TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">By:</TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="top" STYLE="BORDER-BOTTOM:1px solid #000000"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">/s/ Yves J. Ribeill</P>
<P STYLE="font-size:3pt; margin-top:0pt; margin-bottom:1pt">&nbsp;</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">Yves J. Ribeill</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Chief Executive Officer</P> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman">(Principal Executive
Officer)</P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">Date:</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">June 16, 2014</TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">By:</TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="top" STYLE="BORDER-BOTTOM:1px solid #000000"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">/s/ Charles F. Osborne, Jr.</P>
<P STYLE="font-size:3pt; margin-top:0pt; margin-bottom:1pt">&nbsp;</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Charles F. Osborne, Jr.</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Chief Financial
Officer</P> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman">(Principal Financial and Accounting Officer)</P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">Date:</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">June 16, 2014</TD></TR>
</TABLE></DIV>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>INDEX TO EXHIBITS </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD WIDTH="90%"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1.00pt solid #000000; width:28.45pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Exhibit<BR>Number</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1.00pt solid #000000; width:85.25pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Description&nbsp;of&nbsp;Document</B></P></TD></TR>


<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>&nbsp;&nbsp;&nbsp;&nbsp;3.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Amended and Restated Certificate of Incorporation (Filed with the SEC as Exhibit 3.1 to our current report on Form 8-K, filed with the SEC on May 12, 2014, SEC File No. 000-36365).</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>&nbsp;&nbsp;&nbsp;&nbsp;3.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Amended and Restated By-Laws (Filed with the SEC as Exhibit 3.4 to our Registration Statement on Form S-1, filed with the SEC on February 27, 2014, SEC File No. 333-194192).</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>&nbsp;&nbsp;&nbsp;&nbsp;4.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Reference is made to Exhibits 3.1 and 3.2.</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>&nbsp;&nbsp;&nbsp;&nbsp;4.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Fifth Amended and Restated Investor Rights Agreement, dated December 11, 2013 (Filed with the SEC as Exhibit 10.21 to our Registration Statement on Form S-1, filed with the SEC on February&nbsp;27, 2014, SEC File No.
333-194192).</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>&nbsp;&nbsp;10.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">SCYNEXIS, Inc. 2014 Equity Incentive Plan and Form of Stock Option Agreement and Form of Stock Option Grant Notice thereunder (Filed with the SEC as Exhibit 99.3 to our Registration Statement on Form S-8, filed with the SEC on May
16, 2014, SEC File No. 333-196007).</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>&nbsp;&nbsp;10.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">SCYNEXIS, Inc. 2014 Employee Stock Purchase Plan (Filed with the SEC as Exhibit 99.4 to our Registration Statement on Form S-8, filed with the SEC on May 16, 2014, SEC File
<FONT STYLE="white-space:nowrap">No.&nbsp;333-196007).</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>&nbsp;&nbsp;10.3</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Employment Agreement, dated January 2014, between SCYNEXIS, Inc. and Carole A. Sable (Filed with the SEC as Exhibit 10.24 to our Registration Statement on Form S-1, filed with the SEC on February 27, 2014, SEC File No.
333-194192).</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>&nbsp;&nbsp;10.4</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Patent Assignment, dated January 28, 2014, between SCYNEXIS, Inc. and Merck Sharpe &amp; Dohme Corp (Filed with the SEC as Exhibit 10.28 to our Registration Statement on Form S-1, filed with the SEC on February 27, 2014, SEC File
No. 333-194192).</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>&nbsp;&nbsp;31.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Certification of Chief Executive Officer pursuant to Rule 13-a-14(a) or Rule 15(d)-14(a) of the Exchange Act</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>&nbsp;&nbsp;31.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>&nbsp;&nbsp;32.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Certification of Chief Executive Officer and Chief Financial Officer pursuant to 13a-14(b) or <FONT STYLE="white-space:nowrap">15d-14(b)</FONT> of the Exchange Act</TD></TR>
</TABLE>
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<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>d722469dex311.htm
<DESCRIPTION>EX-31.1
<TEXT>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="right"><B>Exhibit&nbsp;31.1 </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>CERTIFICATIONS </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I, Yves J. Ribeill,
certify that: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left">1.</TD>
<TD ALIGN="left" VALIGN="top">I have reviewed this Form&nbsp;10-Q of SCYNEXIS,&nbsp;Inc.; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">2.</TD>
<TD ALIGN="left" VALIGN="top">Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">3.</TD>
<TD ALIGN="left" VALIGN="top">Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">4.</TD>
<TD ALIGN="left" VALIGN="top">The registrant&#146;s other certifying officer(s)&nbsp;and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e)&nbsp;and 15d-15(e)) for
the registrant and have: </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">a)</TD>
<TD ALIGN="left" VALIGN="top">Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">b)</TD>
<TD ALIGN="left" VALIGN="top">Evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">c)</TD>
<TD ALIGN="left" VALIGN="top">Disclosed in this report any change in the registrant&#146;s internal control over financial reporting that occurred during the registrant&#146;s most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant&#146;s internal control over financial reporting; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">5.</TD>
<TD ALIGN="left" VALIGN="top">The registrant&#146;s other certifying officer(s)&nbsp;and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit committee of
the registrant&#146;s board of directors (or persons performing the equivalent functions): </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">a)</TD>
<TD ALIGN="left" VALIGN="top">All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant&#146;s ability to record,
process, summarize and report financial information; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">b)</TD>
<TD ALIGN="left" VALIGN="top">Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&#146;s internal control over financial reporting. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Date: June 16, 2014 </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><DIV ALIGN="right">
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<TR>
<TD WIDTH="100%"></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD></TR>
<TR>
<TD HEIGHT="16"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" STYLE="BORDER-BOTTOM:1px solid #000000">/s/ Yves J. Ribeill</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Yves J. Ribeill</P> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman">Chief Executive
Officer</P></TD></TR>
</TABLE></DIV>
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<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>d722469dex312.htm
<DESCRIPTION>EX-31.2
<TEXT>
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<TITLE>EX-31.2</TITLE>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="right"><B>Exhibit&nbsp;31.2 </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>CERTIFICATIONS </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I, Charles F. Osborne,
Jr., certify that: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">1.</TD>
<TD ALIGN="left" VALIGN="top">I have reviewed this Form&nbsp;10-Q of SCYNEXIS,&nbsp;Inc.; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">2.</TD>
<TD ALIGN="left" VALIGN="top">Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">3.</TD>
<TD ALIGN="left" VALIGN="top">Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">4.</TD>
<TD ALIGN="left" VALIGN="top">The registrant&#146;s other certifying officer(s)&nbsp;and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e)&nbsp;and 15d-15(e)) for
the registrant and have: </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">a)</TD>
<TD ALIGN="left" VALIGN="top">Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">b)</TD>
<TD ALIGN="left" VALIGN="top">Evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">c)</TD>
<TD ALIGN="left" VALIGN="top">Disclosed in this report any change in the registrant&#146;s internal control over financial reporting that occurred during the registrant&#146;s most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant&#146;s internal control over financial reporting; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">5.</TD>
<TD ALIGN="left" VALIGN="top">The registrant&#146;s other certifying officer(s)&nbsp;and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit committee of
the registrant&#146;s board of directors (or persons performing the equivalent functions): </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">a)</TD>
<TD ALIGN="left" VALIGN="top">All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant&#146;s ability to record,
process, summarize and report financial information; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">b)</TD>
<TD ALIGN="left" VALIGN="top">Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&#146;s internal control over financial reporting. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Date: June 16, 2014 </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt">


<TR>
<TD WIDTH="100%"></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:Times New Roman">/s/ Charles F. Osborne, Jr.</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Charles F. Osborne, Jr.</P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Chief Financial Officer</P></TD></TR>
</TABLE></DIV>
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<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>4
<FILENAME>d722469dex321.htm
<DESCRIPTION>EX-32.1
<TEXT>
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<TITLE>EX-32.1</TITLE>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="right"><B>Exhibit&nbsp;32.1 </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>CERTIFICATION </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Pursuant
to the requirement set forth in Rule&nbsp;13a-14(b)&nbsp;of the Securities Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;), and Section&nbsp;1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. &#167;1350), Yves J.
Ribeill, Chief Executive Officer of SCYNEXIS,&nbsp;Inc. (the &#147;Company&#148;), and Charles F. Osborne, Jr., Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">1.</TD>
<TD ALIGN="left" VALIGN="top">The Company&#146;s Quarterly Report on Form&nbsp;10-Q for the period ended March&nbsp;31, 2014, to which this Certification is attached as Exhibit&nbsp;32.1 (the &#147;Periodic Report&#148;), fully complies with the
requirements of Section&nbsp;13(a)&nbsp;or Section&nbsp;15(d)&nbsp;of the Exchange Act, and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">2.</TD>
<TD ALIGN="left" VALIGN="top">The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">In Witness Whereof, the undersigned have set their hands hereto as of June 16, 2014. </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt">


<TR>
<TD WIDTH="44%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="8%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="44%"></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:Times New Roman">/s/ Yves J. Ribeill</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:Times New Roman">/s/ Charles F. Osborne, Jr.</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Yves J. Ribeill</P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Chief Executive Officer</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Charles F. Osborne, Jr.</P> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman">Chief Financial
Officer</P></TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">This certification accompanies the Form&nbsp;10-Q to which it relates, is not deemed filed with the Securities
and Exchange Commission and is not to be incorporated by reference into any filing of SCYNEXIS,&nbsp;Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the
Form&nbsp;10-Q), irrespective of any general incorporation language contained in such filing. </P>
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